Landlords face paying National Insurance on rental income
9:29 AM, 28th August 2025, 7 months ago
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Millions of landlords could be hit by a plan to impose National Insurance contributions on rental income to generate around £2 billion in additional revenue.
Treasury sources have told The Times that the Chancellor, Rachel Reeves, wants to target ‘unearned income’.
The idea is being floated to tackle a £40 billion deficit in public finances, and it is being championed by some Labour MPs.
In doing so, Ms Reeves will maintain her bid to avoid breaching pre-election commitments not to increase VAT, income tax or existing National Insurance rates.
Landlords could sell up
Critics of the plan are already lining up with Sarah Coles, the head of personal finance at Hargreaves Lansdown, saying: “The British love affair with property could be tested to destruction.
“The latest Budget rumour is that National Insurance could be payable on the profits from rental income.
“Property is already one of the least tax-efficient ways to invest, and by adding to the mountain of tax paid by landlords, it may persuade even more of them to sell up.”
She added that landlords already face an array of taxes including a stamp duty surcharge, paying income tax on profits from rental income and because the income tax thresholds have been frozen since 2021, more landlords are paying higher rates and facing bigger tax bills.
Landlords have ‘unearned income’
The Times reports sources close to the Budget preparations saying that applying National Insurance to rental income would broaden the scope of earnings subject to the levy, rather than altering its rate.
That’s a nuance likened to the recent decision to impose VAT on private school fees.
One Labour insider said: “Property income is a significant potential extra source of funds.”
They added that landlords were seen as a way of targeting ‘unearned revenue’.
Official data shows that net property income reached £27 billion in 2022-23, so an 8% National Insurance charge on this amount could yield £2.18 billion.
Smaller landlords hit
However, the structure of the levy could disproportionately impact smaller landlords.
For instance, those earning between £50,000 and £70,000, a group of 360,000 landlords generating £4.76 billion, could face an additional annual bill of £1,057 if the standard 8% rate is applied.
The existing National Insurance framework reduces to 2% for earnings above £50,000, which could exacerbate the burden on smaller property owners.
The proposal, initially floated by the Resolution Foundation last September under the leadership of Torsten Bell, who has since become a Labour MP and key figure in Ms Reeves’s budget team, was shelved but has resurfaced as a viable option.
With 2.2 million individuals reporting property income and 19% of households renting privately, according to the English Housing Survey, the policy could have far-reaching implications.
Accelerate the landlord exodus
Shaun Moore, a tax and financial planning expert at Quilter, said: “The proposal to apply National Insurance to rental income would be another significant blow to the buy to let sector, which has already been squeezed from all angles in recent years.
“Introducing an additional tax burden risks accelerating the exodus of landlords from the market, further reducing the supply of rental properties at a time when demand remains high.”
He added: “This imbalance will inevitably push rents even higher, worsening affordability for tenants and deepening the housing crisis.
“Similarly, the addition of NI would almost certainly be passed on to renters through higher rents, compounding the problem.”
Tags:
Landlord tax changes, Landlords, National Insurance rental income, property tax UK, public finance shortfall, Rachel Reeves budget, UK Budget 2025, unearned income tax
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Member Since July 2013 - Comments: 1996 - Articles: 21
4:43 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Reluctant Landlord at 28/08/2025 – 10:26
“So do I work or am I not a working person?”
According to Starmer (though he won’t put it in so many words) working people are those without savings, living from pay cheque to pay cheque. Everybody else who has got on in life is a target for whatever Labour want to throw at them.
Member Since September 2015 - Comments: 1013
4:50 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Beaver at 28/08/2025 – 16:32If they do introduced this, they probably give it a different name so that it could be applied to pensioners (and possibly corporate Landlords as well).
She could extend Sec. 24 to drag in corporate Landlords, or reduce the amount of relief given from the current 20%. Or both.
Member Since September 2015 - Comments: 1013
4:55 PM, 28th August 2025, About 7 months ago
Reply to the comment left by George Ado at 28/08/2025 – 16:39
Labour, as always, only know how to tax & spend. The concept of the Laffer Curve is beyond their comprehension.
Member Since March 2024 - Comments: 281
5:00 PM, 28th August 2025, About 7 months ago
Reply to the comment left by NewYorkie at 28/08/2025 – 16:21
State pension entitlement is a little more complex. NI isn’t paid by those who reach state pension age – but some may have reached full entitlement to state pension before that age and others may reach it without having paid enough years for a full pension.
35 years contributions (or credited years) are needed for a full state pension now. It raises an interesting point. I am now a state pensioner but did not have enough years for a full pension as for a longish period my rental properties were my sole income with no NI paid. I bought a number of additional years to bring my total up to 35 to get full pension. These years cost about £800 each at present rates. Presumably paying NI will mean landlords get years credited towards state pension and possibly other contributory benefits if it comes to pass?
Member Since May 2018 - Comments: 1999
5:03 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Gromit at 28/08/2025 – 16:50
I suspect that what they are going to do is what they are going to do and it probably won’t have anything to do with justice. The post says:
“With 2.2 million individuals reporting property income and 19% of households renting privately, according to the English Housing Survey, the policy could have far-reaching implications.”
It seems likely then that the policy would result in a rent increase for 19% of households housing 2.2 million individuals.
The proposal is regressive.
Member Since May 2024 - Comments: 46
5:12 PM, 28th August 2025, About 7 months ago
Is this a sign of what is to come for the next four years? Speculation for two / three months prior to each budget of what doom and gloom tax burden will be imposed by Labour next, leading to individuals and businesses putting off investment decisions and thus stalling the economy for four to six months each year?
Member Since May 2018 - Comments: 1999
5:15 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Northern Observer at 28/08/2025 – 17:12
The consequence of all that ‘speculation’ is that the only sensible thing an agent can advise a landlord is to put the rent up.
It didn’t use to be this way less than ten years ago. Less than ten years ago my agent was advising me to hold rents down a bit.
Member Since July 2013 - Comments: 1996 - Articles: 21
5:16 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Keith Wellburn at 28/08/2025 – 17:00
Keith, I wouldn’t presume it will be fair. It’s just a way of getting more tax. A tax surcharge is more likely such as a flat 8% on all residential rental income..
Unless they tax corporate landlords, the burden will fall on small landlords and the tax take will be higher for small landlords..
Member Since May 2018 - Comments: 1999
5:18 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Ian Narbeth at 28/08/2025 – 17:16
Quite right, except that the higher tax take will actually be paid by tenants.
Member Since March 2024 - Comments: 281
6:24 PM, 28th August 2025, About 7 months ago
Reply to the comment left by Ian Narbeth at 28/08/2025 – 17:16
I’d agree. Remembering the unearned income surcharge of 15% Labour had in place in the 1970s, I recall being concerned when Blair was elected in 1997 that New Labour would enact something similar.
Funny how Brown turned out to be the landlords friend, and it was the Tories in 2015 when they shook off the Lib Dem’s who put the boot in for smaller landlords.
If either NI or a surcharge come in I’ll be cashing in my last property, down from fourteen ten years ago. Anyone wanting exposure to property of all types now has REITs and £20k worth can go into an ISA each year meaning income and gains are tax free.