Government considers putting National Insurance on landlord rents

Landlords could soon have to pay National Insurance on rental payments they receive for properties.

Rachel Reeves is considering taxing landlords further by charging National Insurance on their rental payments, according to reports first published in The Times newspaper.

The Treasury hopes to raise as much as £2 billion a year from the proposal which would see a potential 8% levy on rents landlords charge tenants.

Pension earnings along with savings and property income are exempt from NI charges, unlike salaries which incur the tax.

Why is the Government considering taxing landlords?

The Government is facing an uphill battle to balance its budget with rising debt servicing costs and self-inflicted rising bills such as state pension and public sector workers’ salary hikes.

But Labour made clear in its manifesto in the 2024 General Election that it wouldn’t hike taxes on working people. In practice this is understood to mean no hikes to income tax, national insurance or VAT. But it does not mean you can’t find new people to charge NI on.

Landlords have come under increasing pressure in recent years. A law change in 2017 prevented landlords from deducting mortgage interest from their tax liabilities. This meant in practice landlords went from being taxed on what they earned above the cost of their mortgage to being taxed on the whole amount – even if most of it went to the bank.

This means their effective tax rates are already extremely high, and would be even higher if NI were to begin to be charged.

Of course, the biggest problem then is how the landlord pays for the additional charge? In most cases, as with other taxes, they would simply pass the cost on to their tenants.

This is not the only property tax proposal the Government has floated, with changes to stamp duty and other areas such as capital gains tax on primary residences being floated.

Property portal Zoopla has warned as a result that the ideas are putting the brakes on the market as homeowners wait and see the outcome of November’s Budget.

Photo by Mike Bird