According to The Times, the government is considering a proposal to levy National Insurance contributions on landlords’ rental profits—a move that could generate an estimated £2 billion for the Treasury. Landlords already pay income tax on rental earnings, though some expenses can still be offset.
Currently, National Insurance is charged on earned income for individuals aged 16 up to state pension age. It applies to weekly earnings above £242 or annual self-employed profits exceeding £12,570. The standard rates are 8% for employees and 6% for the self-employed, with a reduced rate of 2% applied to income over £50,270.
The National Insurance proposal is the latest in a string of tax measures floated over the summer, as the government gears up for the autumn Budget. Other suggestions—such as changes to stamp duty and the introduction of capital gains tax on main residences—have also surfaced, each aimed at boosting Treasury revenues.
Yet among these, it's the NI plan that has sparked the most intense backlash from letting agents, who warn it could further destabilise the private rental sector.
A spokesperson for a North London estate agent, says: “These plans might generate some additional revenue but at what cost? Landlords are already being clobbered by tax and regulatory changes which have reduced their profits and increased operating costs. On top of that, the Renters’ Rights Bill is imminent.
“As it is, it is widely appreciated that there isn’t enough rental property on the market and if this plan to charge national insurance comes to pass, this extra tax may just be the final straw. This could result in an even lower supply, creating less choice, lower standards and high rents which is what governments want to avoid.”
Another estate agency insider, warns: “Targeting landlords won’t lose the government many votes but such moves invariably end up hurting tenants. With landlords already selling up ahead of the Renters’ Rights Bill and tougher green regulations, another disincentive would reduce supply further and put upwards pressure on rents.
“Those that stay may pass on the extra costs in other ways. Governments need to fully appreciate that when you tax an activity, you get less of it.”
A director of estate agents concentrating on London areas, comments: “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. A policy with such serious unintended consequences deserves more scrutiny and a strategic approach, not partisan theatre.”
A chief executive of a Private landlords association, says: “Further punitive tax hikes on the rental sector will lead only to rents going up, hitting the very households the Government wants to protect. It would come on top of last year’s increase to stamp duty on homes purchased to rent and proposals expecting landlords to pay up to £15,000 on energy efficiency improvements to properties.
“Analysis by an estate agent shows that up to one million new rental homes will be needed by 2031 to meet demand. Given this, the Chancellor should be using the tax system to encourage long term investment in new good quality rental housing. She should also heed the advice of the Committee on Fuel Poverty and reform the tax system to support investment in energy efficiency improvements.”
Shaun Moore, tax and financial planning expert at Quilter, comments: “The proposal … would be another significant blow to the buy-to-let sector, which has already been squeezed from all angles in recent years.
“Landlords have faced a raft of changes, from the reduction in mortgage interest relief to tighter regulations and higher borrowing costs, making it increasingly difficult for amateur landlords to operate profitably. On top of this, the abolition of ‘no-fault’ evictions under the Renters’ Rights Bill means landlords now face far greater challenges in regaining possession of their properties, adding another layer of complexity and risk to letting.
“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. 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.”
A British multinational wealth management company’s tax and financial experts says: “The proposal … would be another significant blow to the buy-to-let sector, which has already been squeezed from all angles in recent years.
“Landlords have faced a raft of changes, from the reduction in mortgage interest relief to tighter regulations and higher borrowing costs, making it increasingly difficult for amateur landlords to operate profitably. On top of this, the abolition of ‘no-fault’ evictions under the Renters’ Rights Bill means landlords now face far greater challenges in regaining possession of their properties, adding another layer of complexity and risk to letting.
“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. 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.”