The Treasury’s reported plan to levy National Insurance (NI) on rental income could mark one of the most significant tax shifts for landlords in recent years — with ripple effects likely to be felt by millions of tenants across the UK.
Officials under Chancellor Rachel Reeves are considering extending NI to property income in a bid to raise around £2 billion a year. At present, landlords pay income tax on profits from rental properties, but they are exempt from NI contributions. Applying the same rates that workers face — 8% for employees, 6% for the self-employed, and 2% on earnings above £50,270 — would create an entirely new tax burden on the sector.
What It Means for Landlords’ Income
The impact on landlords’ profits would depend on the size of their portfolio and taxable income. For example:
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A landlord earning £20,000 in annual rental profits would face an extra NI bill of £1,200 (at 6%).
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A larger portfolio generating £50,000 in rental profits could see an NI charge of around £3,000.
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For high-earning landlords with £80,000 in profits, the extra tax could amount to £3,600 — 6% on the first £50,270 and 2% thereafter.
This would come on top of existing income tax liabilities, leaving some landlords facing effective tax rates well above 40% once mortgage interest restrictions and other rules are taken into account.
Pressure on Rent Levels
Industry analysts say most landlords are likely to respond by passing on at least some of the extra cost to tenants. Based on typical yields, the increase could mean:
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A landlord with a property generating £1,000 per month in rent and £8,000 in annual taxable profit might raise rents by £50–£100 a month just to cover the new NI charge.
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For larger portfolios, the effect could be magnified across multiple properties, compounding upward pressure on rents in areas already experiencing shortages.
Sarah Coles of Hargreaves Lansdown warns:
“With almost a third of landlords planning to sell up and supply already falling, adding another layer of tax will only worsen the crunch. Tenants are likely to shoulder the cost through higher rents.”
Knock-On Risks for the Rental Market
The buy-to-let sector has already faced significant headwinds: the removal of full mortgage interest relief, tougher regulations, higher borrowing costs, and the looming abolition of no-fault evictions. Many smaller landlords have quit the market altogether.
According to Rics, the number of rental properties listed has fallen for 11 consecutive months, even as demand remains high. Rents have already risen by 5.9% over the past year, continuing a three-year run of increases above 5%. If NI is added to rental income, property experts warn tenants could see further annual rent hikes of 5–10%, depending on location and supply.
Ben Beadle, chief executive of the National Residential Landlords Association, argues the policy risks worsening an already acute shortage:
“Punitive tax hikes will simply drive more landlords out of the market, leading to fewer homes and higher rents. With demand projected to require one million new rental homes by 2031, we cannot afford to discourage investment.”
The Bigger Picture
The proposed NI reform is part of a broader push by Reeves’s Treasury to extract more from property. Other measures under discussion include a new capital gains levy on homes worth over £1.5 million and additional taxes on property sales above £500,000.
For landlords, the direction of travel is clear: higher taxes, lower margins, and more regulatory scrutiny. For tenants, it raises the prospect of even tighter supply and more expensive rents.
As the Chancellor prepares her autumn Budget, the question will be whether the political gains of targeting “unearned income” outweigh the risk of worsening Britain’s already stretched rental market.