UK landlords may soon face a new tax on rental income, as the Treasury considers extending National Insurance (ni) contributions to rents in the upcoming autumn budget, potentially raising up to £2 billion for public finances.
Landlords facing national insurance on rental income
For years, rental income has largely been exempt from NI, which typically applies at 8% on employment earnings, dropping to 2% above £50,270. The proposed change would see landlords required to pay these contributions on their rental profits, not just on other forms of earned income.
The move comes as Chancellor Rachel Reeves seeks ways to address a significant budget shortfall without breaching Labour’s pledges not to raise existing rates for income tax, VAT, or NI, but rather by expanding the base of income subject to those taxes.
The policy is projected to generate approximately £2 billion in additional revenuebased on data indicating about 2.2 million landlords collectively make £27 billion in rental income annually.
Potential financial impact on landlords
A typical landlord earning between £50,000 and £70,000 could see their tax bill rise by just over £1,000 per year if the measure is enacted. The plan is being positioned as an attempt to ensure landlords contribute more equitably, bringing income from property in line with employment income.
Supporters argue that taxing rental profits is fairer and targets so-called unearned income. They claim the change does not break Labour’s tax pledges because it extends NI rather than increases its rate.
Critics, however, warn that the measure could drive landlords out of the market, reducing rental property supply and potentially increasing rents for tenants. With the rental sector already under pressure from earlier tax changes and regulations, the risk of further rent rises is a point of anxiety for tenants and landlords alike.
Landlords are urged to monitor the developments closely, as the autumn budget – expected in late October or early November 2025 will determine whether the national insurance extension to rental income becomes law.
