The Treasury is eyeing up a new levy that could transform the economics of Britain’s rental market. Under plans being considered by Chancellor Rachel Reeves, landlords would for the first time pay National Insurance (NI) on rental income — a move forecast to raise £2 billion a year for the Exchequer.
But behind the headline numbers lies a policy with potentially profound consequences for both property investors and tenants. Experts warn that the tax could tip already-stretched landlords into the red, forcing them either to sell up or pass on the cost to renters.
How the Tax Would Work
Currently, landlords pay income tax on rental profits but do not pay NI, which is reserved for employment and self-employment income. Reeves’s proposal would change that:
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6% NI would be charged on rental profits (8% for employees, 2% above £50,270).
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For a landlord with £20,000 in profit, this means an extra £1,200 bill.
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At £50,000 profit, the cost jumps to £3,000.
Since most landlords’ profit margins are only 20–30% of rent after expenses, these figures quickly eat into returns.
The Regional Picture
New analysis shows the levy would require rent hikes of 2–3% nationwide to cover the cost.
| Region | Avg Monthly Rent | Extra Rent Needed | % Increase |
|---|---|---|---|
| London | £2,100 | £55–£60 | 2.7% |
| South East | £1,300 | £30–£35 | 2.5% |
| East of England | £1,200 | £25–£30 | 2.3% |
| West Midlands | £1,000 | £20–£25 | 2.2% |
| East Midlands | £950 | £20–£22 | 2.1% |
| North West | £950 | £20–£22 | 2.1% |
| Yorkshire & Humber | £900 | £18–£20 | 2.0% |
| North East | £750 | £15–£17 | 2.1% |
| Scotland | £950 | £20–£22 | 2.1% |
| Wales | £850 | £18–£20 | 2.1% |
For a London tenant, this would mean £600–£700 more per year in rent. In the Midlands and North, the rise would typically be £200–£300.
What It Means for You
If you’re a tenant
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Expect landlords to try to pass the cost on, especially in areas where rental supply is tight.
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With rents already up 5.9% in the past year, this could add another 2–3% to your annual bill.
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On a £1,000 rent, that’s an extra £20–£25 a month.
If you’re a landlord
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Profit margins will shrink sharply. A £20,000 annual profit would drop to £18,800 after NI.
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Smaller landlords with single properties may find their ventures unprofitable.
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Larger portfolio landlords face a mixed impact: profits above £50,270 may be taxed at just 2%, softening the blow — but still cutting into returns.
Expert Reactions
Shaun Moore, tax expert at Quilter, described the measure as “another significant blow to landlords, who have been squeezed from all sides in recent years.”
Sarah Coles of Hargreaves Lansdown warned:
“Landlords are already selling up in large numbers. If the supply of rental homes falls further, the tax will end up costing tenants dearly.”
The National Residential Landlords Association, which represents private landlords, was even more forthright. Chief executive Ben Beadle said:
“We need one million new rental homes by 2031. Punitive taxes will only push rents up and drive landlords out.”
A Wider Tax Pattern
The NI plan is not an isolated measure. It comes amid a summer of reports that Reeves is eyeing up property wealth as a key revenue source. Proposals under review include:
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A new capital gains tax on homes worth over £1.5m.
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Fresh charges on property sales above £500,000.
Together, these policies point to a clear shift: property owners are in the Treasury’s crosshairs as it seeks to stabilise Britain’s stretched finances.
The Political Gamble
For Reeves, the potential prize is obvious: £2 billion a year from a tax that can be presented as falling on “unearned income.” But the risk is equally clear. Britain’s rental market is already at breaking point, with supply shrinking and rents soaring.
A policy billed as a raid on landlords could, in practice, leave renters footing the bill. With the Budget just weeks away, millions of households are waiting anxiously to see whether their monthly housing costs are about to climb again.