A major lettings agent has modelled the potential financial hit to landlords if National Insurance contributions (NICs) are applied to rental income—a move reportedly under consideration for the Chancellor’s upcoming Autumn Budget.

According to leaks from HM Treasury, Rachel Reeves is weighing the introduction of NICs on rental profits as part of efforts to raise £0.3 billion and address a projected £40 billion shortfall in public finances.

At present, landlords who hold property in their own name pay income tax on rental profits but are not liable for NICs. That could change under the proposed reforms. In a pre-Budget analysis, the agency says the Treasury’s plan would align rental income with employment income for tax purposes—imposing an 8% NIC rate on profits up to £50,270 and 2% on anything above.

NICs) would apply to rental profits before mortgage interest is deducted—posing a significant threat to landlord margins.

The modelling shows the impact could be severe. A typical landlord earning £16,478 in rental income and paying £7,875 in mortgage interest would see their tax bill jump from £699 to £1,609—more than doubling. For higher-rate taxpayers, the increase is smaller but still painful: a rise from £2,973 to £3,200, leaving just £295 in net profit.

The agency warns that the proposed change would hit certain groups hardest:

• Younger landlords below pension age, who are not exempt from NICs

• Unincorporated landlords, who represent around 80% of the buy-to-let sector

• Lower-income landlords, who often rely on rental income to top up modest wages or pensions

The agency says the measure risks undermining financial viability for thousands of small-scale property investors warns: “While the reform would improve parity between rental and employment income, it risks further reducing the profitability of buy-to-let – particularly for those with high mortgage costs and limited equity. The definition of ‘profit’ is key: if NI is applied before mortgage interest relief, it would amplify the chances of higher-rate taxpayers having to pay tax on loss-making properties.”

It adds that unlike the removal of mortgage interest relief (widely known by landlords as Section 24), which hit higher-rate taxpayers hardest, this proposal could have a greater impact on lower-income landlords. 

The proposal to levy National Insurance on rental income—first floated by the Resolution Foundation—was initially projected to generate up to £3 billion per year. 

However, fresh analysis from agency suggests the actual yield may be significantly lower. With an estimated 40% of the UK’s 3.1 million landlords likely to fall outside the scope of the charge, the agency now forecasts a more realistic revenue figure of around £1 billion annually.