Chancellor scrambles to plug holes with multi-billion pound raid on property as spending outstrips income
Landlords could face a new tax burden this autumn as the Treasury examines whether to extend national insurance (NI) contributions to rental income. The move is being considered as Chancellor Rachel Reeves confronts a £40 billion shortfall in the public finances.
Ahead of last year’s election, Reeves vowed not to raise the rates of VAT, income tax or national insurance. Applying NI to property income, however, would be a loophole and be presented not as a rate rise but as an expansion of the tax base. Insiders have likened the mechanism to imposing VAT on private school fees: broadening the scope without breaching headline pledges.
Property, savings and pension income are currently exempt from NI, which is levied on employment earnings at 8 per cent. Treasury officials have calculated that extending the charge to landlords would have raised just over £2 billion in 2022-23.
The policy would fall unevenly across the sector. According to official figures, the most common bracket for property income is £50,000 to £70,000, covering roughly 360,000 landlords. Under the proposed levy, that group could face an average additional charge of around £1,000 each year.
While larger landlords might absorb the cost, smaller operators could be disproportionately affected. Because NI contributions fall to 2 per cent above £50,000, the effective burden would weigh most heavily on those with modest property portfolios.
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The suggestion originated with the Resolution Foundation, which argued last year that aligning the tax treatment of different income streams would make the system “fairer and more efficient”. Its former director, Torsten Bell, is now an MP and has been elevated within Reeves’s budget team, giving the idea renewed prominence.
Supporters inside government argue that landlords represent a visible source of “unearned income” at a time when Reeves must find revenue to stabilise the UK’s debt position. Long-term borrowing costs have risen to their highest level in almost three decades, sharply increasing the pressure on the Treasury.
Landlord groups have warned that the policy would accelerate the exodus from the private rental sector. Many smaller investors are already struggling with higher mortgage costs, tighter regulation and reduced tax relief on finance expenses. An NI charge on rental income, critics say, would tip more into selling up—further shrinking supply and putting upward pressure on rents.
Analysts note that corporate buy-to-let structures, which distribute profits through dividends, would fall outside the scope of such a measure. That could encourage individual landlords to incorporate, changing the shape of the rental market without necessarily increasing the Exchequer’s yield.
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Proponents counter that if some landlords sell, more homes could become available to first-time buyers. They point to the government’s Renters’ Rights Bill, now in its final stages, which restricts rent increases and outlaws no-fault evictions, as a safeguard for tenants.
Reeves is understood to be considering a wider package of property-related measures. Earlier this month The Times reported that the Treasury was exploring a capital gains charge on the sale of high-value homes. A reworking of stamp duty thresholds has also been floated.
The Chancellor has yet to comment publicly on the prospect of charging NI on rental income. A Treasury spokesperson said only: “As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy. We remain committed to keeping taxes for working people as low as possible.”
For landlords and the lenders who support them, the coming Budget could mark another shift in the policy landscape. Whether Reeves ultimately chooses to pursue NI reform may depend less on ideological preference than on the brute arithmetic of the deficit.
