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 March 2023 - Comments: 1506
9:17 PM, 28th August 2025, About 7 months ago
It won’t happen as it is just unworkable – will they make landlords over pension age pay NI, but not for any other work they may do.
Will the NI be on profits or turnover (rent), if rent you could actually be in a loss making situation.
It was also reported that LTD companies themselves may have to pay NI – that of course is just plain stupid
This sounds like a really well thought out plan
Member Since October 2013 - Comments: 1630 - Articles: 3
2:42 PM, 29th August 2025, About 7 months ago
Reply to the comment left by GlanACC at 28/08/2025 – 21:17
Thought out by an vowed Marxist; Torsten Bell, Reeves’ adviser, who has never worked a day in a normal job. Believe it or not, he has a twin brother also in government. Does Reeves know which one she’s being advised by? Does it really matter when they’re both as bad as each other and she doesn’t know what she’s doing?
Member Since May 2018 - Comments: 1997
4:16 PM, 29th August 2025, About 7 months ago
Reply to the comment left by GlanACC at 28/08/2025 – 21:17
Limited companies already do pay national insurance. That’s one of the problems small companies have at the moment because Rachel Reeves increased employers’ national insurance and this has had a devastating impact on retail, hospitality, private social care, the building industry and many other areas. 60% of the economy is the small business sector and she’s devastating the market.
But it probably wouldn’t matter to a marxist if the PRS fails because marxists don’t believe in free markets anyway.
The problem with whacky proposals like labour keep coming out with is that they are regressive. The pain is inflicted upon the little people….tenants, small landlords, small businesses. Stopping small landlords from being able to offset their finance costs and possibly also simultaneously charging them NI is only going to visit even more pain on tenants. Only someone dishonest or stupid would do that.
Member Since June 2015 - Comments: 193
5:35 PM, 29th August 2025, About 7 months ago
How about this for a thought:
Why not just get rid of National Insurance for individuals. Instead increase income tax rates.
NI is currently at 8% and IT at 20% for basic rate taxpayers/
If NI for individuals was abolished and IT rates went up to 25% that would seem fair, would it not?
Overall rates would have come down by 3%.
What they would not tell you however is that for everyone who does not pay NI (pensioners) their tax rate has increased by 30% ! But that’s OK as they have had all their life to save.
Don’t think this is too far fetched. Why do you think successive governments have been reducing the rates of employees’ NI over recent years.
Member Since March 2024 - Comments: 281
5:49 PM, 29th August 2025, About 7 months ago
Reply to the comment left by Simon Lever – Chartered Accountant helping clients get the best returns from their properties at 29/08/2025 – 17:35
Hunt’s two cuts of 2p in very quick succession are the only reductions I can see. Labour pledged to not increase them. Otherwise it was an upward path from the 1970s to 2023.
With politicians fondness for re-announcing the same policies, I wonder if many realised there were actually two reductions.
Member Since October 2013 - Comments: 1630 - Articles: 3
6:06 PM, 29th August 2025, About 7 months ago
Reply to the comment left by Simon Lever – Chartered Accountant helping clients get the best returns from their properties at 29/08/2025 – 17:35
As a pensioner who has paid 40+ years of NI, and am not paying any more because my pension has been calculated on that basis, I wouldn’t appreciate that! But if they want to increase my pension by every additional year I’m paying NI, that’s a different matter.
NI and the state pension entitlement is already in such a mess, I can only imagine the chaos if they tried it.
My partner qualified for her pension in June. She was told in writing she didn’t need additional years to receive the full pension and was given her statement several years back. Strangely, she has been told she will get less than her statement, even though there have been a number of triple lock increases since. DWP can’t explain it and said she must speak to HMRC. They can’t explain it because they claim they had to destroy their old hard copy records some years ago due to GDPR! So, her question was, how can you tell me what my pension is when you don’t have my full records. They couldn’t answer. Luckily, she is an excellent record keeper and we look forward to round 3.
Member Since May 2025 - Comments: 74
4:50 PM, 1st September 2025, About 7 months ago
How ironic that unearned income will become earned income.
This will not have the desired tax raising effect that Rachel wants. There are lots of loopholes here. For example those past state pension age, those above 75, those under 21!
I suspect this is Rachel fishing but if it does go ahead I would be pursuing class action to retrospectively go back 7 years or better still pursue the government for fraud since it turns out their claim that rental income is not income is false!
I’ve written a blog post which goes into detail of the loopholes here:
https://think-we-are-stupid.blogspot.com/2025/08/rachel-planning-to-charge-national.html
Member Since May 2018 - Comments: 1997
5:30 PM, 1st September 2025, About 7 months ago
Reply to the comment left by Suspicious Steve at 01/09/2025 – 16:50
Rachel has created chaos generally.
Employers got hit by a rise in the minimum wage together with a rise in employers NI and a drop in the LEVEL at which employers have to pay NI which meant that NI was due at a higher level on a greater portion of the wage bill. In order to avoid problems with retention employers also come under pressure to maintain the differential between those on the minimum wage and those who have been in the business longer. Inevitably that caused businesses to retrench because they had no choice. They started avoiding recruitment, laid off staff, reduced employee hours because they had to. It hit retail, private social care, the building industry and others particularly hard.
But it seems to me that you are correct in your blog. If the government decides that rental income is earned income then it ought to be legal to pay that earned income into a pension such as a SIPP or SSAS. Presumably, once the income comes out of the SIPP or SSAS it wouldn’t be liable for national insurance because there’s no national insurance payable on pension income.
Member Since October 2013 - Comments: 1630 - Articles: 3
5:39 PM, 1st September 2025, About 7 months ago
Reply to the comment left by Beaver at 01/09/2025 – 17:30
If it happens, there will be scope for a class action by landlords who would have benefited from being able to use their ‘earned’ income for pension contributions.
Member Since March 2024 - Comments: 281
5:41 PM, 1st September 2025, About 7 months ago
Reply to the comment left by Suspicious Steve at 01/09/2025 – 16:50
Interesting analysis – although the NI starting age of 21 was news to me so I did a search and all I can find is a starting age of 16 including on gov.uk.
(I am now in receipt of state pension and benefited from a credit of one year in the 1970s when I was fifteen and at school doing my O levels. I think it was short lived and something to do with raising the leaving age from 15 to 16. Came in handy though as I was short of years due to my sole income being rental profits for a good number of years, so one less year to buy with voluntary contributions.