The Government is weighing a major shake-up of landlord taxation that could see National Insurance contributions applied to rental income for the first time.
Under the proposal, being considered by Chancellor Rachel Reeves ahead of her Autumn Budget, landlords would pay NI on top of income tax already levied on rental earnings. Treasury officials believe the move could raise around £2 billion annually, helping plug a £40 billion fiscal shortfall while allowing Labour to maintain its manifesto pledge not to raise the main rates of VAT, income tax or NI.
Currently, rental income is exempt from NI. A landlord earning between £50,000 and £70,000 from property could face an additional £1,000 in tax each year if the policy is introduced.
Industry figures have reacted with concern, warning the measure risks destabilising the private rental market at a time when supply is already under strain.
Marc von Grundherr, director at London estate agency Benham & Reeves, said: “This move smacks of political point-scoring rather than sound housing policy. Applying National Insurance to rental income threatens to undermine rental supply by squeezing small and medium-scale landlords, who may pull up stakes or restructure. We’re already seeing supply pressures in many areas, pushing costs onto tenants.”
Siân Hemmings-Metcalfe, operations director at Inventory Base, called the proposal “a move too far” given the upcoming Renters’ Rights Bill: “Layering yet another financial burden onto landlords at a time when the rental sector is about to be reshaped risks deterring responsible landlords. The focus should be on stability and encouraging long-term investment, not short-term populism designed to plug holes in the Treasury’s coffers.”
Sam Humphreys, head of M&A at Dwelly, said many landlords already operate on tight margins: “Measures like this could be the tipping point that drives them out of the sector altogether. Once stock is lost, it is incredibly difficult to rebuild, and the people who pay the price are tenants facing rising rents and fewer housing choices. If the Government wants to improve affordability, it should be working to increase supply – not choking it further with punitive taxation.”
The idea of extending NI to landlords’ rental income highlights the challenges facing Reeves as she looks to balance the books while sticking to Labour’s tax commitments.
While raising revenue from property is politically less sensitive than broad-based tax hikes, analysts warn that squeezing landlords could have the unintended consequence of making housing even less affordable.
With the Autumn Budget weeks away, the measure is likely to fuel fierce debate over how far the Government can go in targeting landlords without worsening the rental crisis for tenants.