Landlords Face National Insurance on Rental Income

Hitting the headlines this week is news that Chancellor Rachel Reeves may be considering a radical new approach to raising government revenue: extending National Insurance (NI) to cover rental income from landlords.

While no official policy has yet been announced, reports in The Times, The Guardian and other media outlets suggest that Treasury officials are actively modelling what such a move could mean for both the property market and the public finances.

The government is reportedly facing a £40bn budget shortfall, and so the search for fresh sources of income has intensified over recent weeks and months, with speculation rife about what may be heading our way as the Autumn Budget approaches.

Having already pledged not to raise the basic, higher or additional rates of income tax, VAT or employee National Insurance, the Chancellor is said to be exploring “unearned income” as an alternative revenue stream.

What is Being Proposed?

Currently, rental income is subject to income tax but not National Insurance. By contrast, employment income carries both – which is why the move is being framed as a way of levelling the playing field between earned and unearned sources of money – which many consider a cynical move to avoid breaking the election pledge to not increase taxes for ‘working people’.

In 2022–23, HMRC recorded £44.7bn of property income by individual landlords across the UK (up to date figures will be released this autumn). This netted out at around £27bn after expenses, meaning that if an 8% NI charge (the standard employee rate) were applied to that, it could generate just over £2bn annually.

For an individual landlord earning £50,000–£70,000 in rent, it would amount to an extra £1,000 or so in tax every year.

Supporters of the measure argue this is a fair contribution, at a time when the government is trying to fund investment in public services without squeezing working people further.

Critics, on the other hand (and there are many, and not all landlords or letting agents!) warn that it amounts to yet another burden on landlords, a group already grappling with rising mortgage costs, stricter energy efficiency rules that may require their investment, and the uncertainty over the eventual content in the Renters’ Rights Bill.

 

The Case ‘in Favour’

Labour insiders quoted in the press describe property as a “significant potential source of funds”. They point out that savings, pensions and property income are largely shielded from National Insurance, even though many households rely heavily on these income streams.

In this light, extending NI to landlords could be seen as a way of ensuring the tax base reflects the full spectrum of wealth in the UK, rather than leaning so heavily on those in PAYE employment.

Some also suggest there may be indirect benefits. If higher taxes on landlords do indeed cause some to sell up, that could increase the supply of homes available to buy and potentially reduce house prices. That in turn might help first-time buyers – a key voter group – to get a foot on the ladder.

 

The Case Against

The property industry has reacted swiftly, as you might expect. Frankly, if this move goes ahead, it really does risk unintended consequences.

Tom Bill, Head of UK Residential Research at Knight Frank, put it like this: “Targeting landlords won’t lose the government many votes, but such moves invariably end up hurting tenants. When you tax an activity, you get less of it.”

This is the crux of the concern. Many landlords are already feeling more and more inclined towards selling up – whether due to the loss of tax relief on rental income, tougher regulations and EPC requirements requiring major works, or the Renters’ Rights Bill making its way through parliament, that is set to move the goalposts. There is a real risk that landlords on the fence may fall the other side of it, and landlords on the edge may take this as the final straw.

A shrinking private rented sector (PRS) would inevitably squeeze tenants, reducing supply and driving rents higher.

Of course, aside from greater competition for rentals pushing rents up, any extra cost to landlords is something that is often simply passed on to tenants too. Those landlords who stay in the market may try to offset the extra tax by raising rents, further compounding affordability issues.

Either way, the worry is that tenants could be the ones to pay the price.

Zoopla has flagged that this sort of speculation in itself is something that may affect buyer behaviour, with some purchasers delaying transactions until after the Autumn Budget to see how tax rules change. At a time when the housing market is already sensitive, the introduction – or even the hint – of new property taxes will undoubtedly undermine confidence.

 

Political Dimensions

Adding another layer of complexity, this is not the only housing-related tax reform reportedly under review. Reeves is also said to be weighing up:

• Replacing Stamp Duty with a national property tax, followed by a potential local levy to replace council tax.
• Removing capital gains exemptions on primary residences valued above £1.5m.

Individually, each of these ideas could transform the way property is taxed. Taken together, they amount to the most significant shake-up in decades.

 

Has The Treasury Department Responded?

So far, the official line from the Treasury has been cautious, or indeed, vague. A spokesperson declined to comment directly on the leaks, repeating instead that “the best way to strengthen public finances is by growing the economy”.

They added that the government remains committed to keeping taxes on “working people” low, highlighting their previous promise not to raise income tax, employee NI or VAT.

This careful wording is important: if Reeves does extend NI to rental income, she could argue that she is still protecting the incomes of those in work, while ensuring landlords contribute what she presumably hopes will be considered ‘their fair share’ by the electorate.

What Could It Mean for Landlords?

At this stage, it’s worth stressing that nothing has been confirmed. The Chancellor will set out her plans in the Autumn Budget later this year, and until then speculation will continue.

If the proposals do make it into policy, however, landlords will face yet another recalculation of their position:

• Tax planning will become more critical. Many may look again at how their portfolios are structured, whether in personal names or via limited companies, and what allowances or reliefs are available.
• Cashflow pressures could mount. For landlords already juggling higher interest rates and energy upgrade costs, another tax could tip the balance.
• Strategic exits may accelerate. Some may choose to sell before changes take effect, reshaping the market.

For letting agents and property professionals, it underlines the need to keep communication lines open with the landlords we support – helping them understand the risks, prepare early, and where possible find ways to adapt.

Conclusion

The suggestion that National Insurance could be levied on rental income marks another significant potential shift in the way property is taxed in the UK.

Proponents see it as fair and necessary; opponents warn it could shrink supply and hurt tenants with what seem inevitable rent increases.

Until Reeves delivers her Autumn Budget, landlords can only wait and watch. But whether or not this measure makes it into law, the conversation itself shows just how firmly the private rented sector continues to lie in the crosshairs when it comes to government policy.

Frequently Asked Questions

Will landlords have to pay National Insurance on rental income?
Nothing has been confirmed yet. The Chancellor, Rachel Reeves, has not announced a formal policy, but reports suggest the Treasury is considering extending National Insurance (NI) to rental income in the Autumn Budget. At present, landlords pay income tax on their profits but do not pay NI. If implemented, landlords could face an additional 8% charge on rental income.

How much extra tax would landlords pay if National Insurance is applied to rent?
That depends on how much rental income they receive. Estimates suggest that:

• A landlord with £50,000–£70,000 annual rental income could pay around £1,000 more per year.
• Across the UK, NI on rental income could raise over £2 billion annually, based on HMRC’s most recent data.

The final impact would depend on how the scheme is designed — including whether thresholds, exemptions, or reliefs are introduced.

Would this apply to limited company landlords?
That remains unclear. Most reports assume the NI charge would apply to individuals who own property in their own name and declare rental profits via self-assessment. Landlords operating through limited companies already pay corporation tax on profits, plus personal tax on dividends, so the government may choose to exclude them — but this has not been confirmed.

Could landlords pass the cost on to tenants?
In theory, yes. When landlords face higher costs, many try to recoup them through higher rents. However, whether this is possible depends on local market conditions. In areas where demand outstrips supply, tenants are more likely to feel the impact. Critics of the proposal warn that taxing landlords in this way could shrink rental supply and push rents higher, ultimately hitting tenants hardest.