Landlords face paying National Insurance on rental income
9:29 AM, 28th August 2025, 7 months ago
116
Categories:
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
Comments
Have Your Say
Every day, landlords who want to influence policy and share real-world experience add their voice here. Your perspective helps keep the debate balanced.
Not a member yet? Join In Seconds
Login with
or
Previous Article
Landlords face severe consequences for unsafe housing in HarlowNext Article
Mystic Mortar Landlord Horoscope 29 Aug 2025Related Articles
Can UK Landlords survive the ongoing tax raid?
8 months ago | 6 comments
Rumours of property tax spark backlash ahead of Autumn Budget
8 months ago | 14 comments
Member Since October 2023 - Comments: 201
6:48 PM, 1st September 2025, About 7 months ago
People are starting to get really upset, at these clowns burning through OUR money.
Member Since May 2025 - Comments: 74
7:57 AM, 2nd September 2025, About 7 months ago
Reply to the comment left by Keith Wellburn at 01/09/2025 – 17:41
I double checked. I was partly wrong. It is 0% NI on EMPLOYER contributions not EMPLOYEE. So they would pay NI but if Rachel makes employer NI part of scope then they would be exempt.
“The National Insurance (NI) category letter for employees under 21 is M. This category applies to employees aged between 16 and 20 and ensures that the employer’s National Insurance contributions (secondary NICs) are 0% on earnings up to the Upper Secondary Threshold. Once an employee reaches 21, their NI category changes to A for their next pay period.”
Member Since September 2015 - Comments: 1013
8:11 AM, 2nd September 2025, About 7 months ago
Reply to the comment left by Suspicious Steve at 01/09/2025 – 16:50I wouldn’t disagree with anything you say. But there one obvious and simple way around it. That is to call it something else i.e.a new tax. Call it a “Rental Profit Tax” it would have none of the negatives and a number of positives e.g. be applicable to corporate Landlords. Is Rachel Thieves and the Treasury team too stupid to see this?
Member Since May 2025 - Comments: 74
8:31 AM, 2nd September 2025, About 7 months ago
Reply to the comment left by Gromit at 02/09/2025 – 08:11
That’s a possible approach they could take – doubtless it will be called a “Levy” since that requires relatively little legislation. That’s why 16% of your (and tenants) electric bill has a hidden “levy tax”.
I suspect this approach would create mass homelessness. I’ve been slowly selling properties anyway – that would simply accelerate it. Doubtless more landlords will exit the rental market creating a shortage of rental properties and therefore rent increases due to supply-and-demand.
However with the impending EPC C I doubt there will be any profit to tax. Virtually every option I have looked at to raise the EPCs are big ticket capital items with 20+ year break-evens. All the easy stuff like boilers, double glazing etc has been done.
Given Section 24 partially introduced the concept of taxing on income rather than actual profits then a levy could be introduced on rental income. That would absolutely be passed onto my tenants and I would make sure they knew that.
Member Since September 2015 - Comments: 1013
8:54 AM, 2nd September 2025, About 7 months ago
Reply to the comment left by Suspicious Steve at 02/09/2025 – 08:31
Whatever she does it’ll hit Tenants harder than Landlords, but “greedy” Landlords can be used as scapegoats
Member Since May 2018 - Comments: 1999
4:06 PM, 2nd September 2025, About 7 months ago
Reply to the comment left by Gromit at 02/09/2025 – 08:54
I agree, I think this is correct.
Even if NI on rental income were to be called a “rental profit tax” or rental income levy it will still be charged to tenants in the form of higher rents if it is levied on non-incorporated landlords who are already unable to offset their finance costs against rents.
Extremists like Torsten Bell probably won’t care about this as they will assume that the pain inflicted on tenants who have no understanding of the economics and tax consequences will drive more tenants to their cause. It’s probably what they want.
It may be that there are a few people in government competent enough to understand that the proposals are regressive but at the moment, competent people in the government are not very obvious.
Member Since October 2013 - Comments: 1630 - Articles: 3
4:26 PM, 2nd September 2025, About 7 months ago
Reply to the comment left by Beaver at 02/09/2025 – 16:06
Interesting Starmer re-shuffle today. He appears to have taken Reeves’ deputy and installed his own economist in Downing Street, leaving Reeves to carry the can. It looks like Torsten Bell has (hopefully) hitched up his wagon to the wrong horse.
Member Since May 2018 - Comments: 1999
4:28 PM, 2nd September 2025, About 7 months ago
Reply to the comment left by NewYorkie at 02/09/2025 – 16:26
I think perhaps it wasn’t a horse he hitched his wagon to, but a donkey.
Member Since October 2013 - Comments: 1630 - Articles: 3
4:38 PM, 2nd September 2025, About 7 months ago
Reply to the comment left by Beaver at 02/09/2025 – 16:28
Let’s not laugh too soon!
Member Since May 2018 - Comments: 1999
5:07 PM, 2nd September 2025, About 7 months ago
Reply to the comment left by NewYorkie at 02/09/2025 – 16:38
I know that we shouldn’t. I also know that scapegoating is common in politics and despite the disaster inflicted upon the economy by this government in a very short period of time, a small part of me still feels sorry for the donkey.