Landlords across the East Midlands could soon face paying National Insurance (NI) on rental income, according to reports of proposals being considered for the upcoming Autumn Budget.
The plan, said to be under review by HM Treasury, is expected to raise up to £2–2.3 billion in additional revenue as part of efforts to address a £40 billion gap in public finances.
Currently, rental income, along with savings and pension income, is exempt from NI contributions, which are typically charged at 8% for employees and 6% for the self-employed. Under these proposals, landlords could see profits from rental income brought in line with other forms of earned income. However, it remains unclear whether this change would apply only to landlords operating as individuals, those using limited company structures, or both.
This development comes alongside other property tax measures reportedly being considered, including:
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Capital Gains Tax (CGT) on sales of homes over £1.5 million
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Potential reforms to Stamp Duty, with speculation of an annual property tax on homes worth more than £500,000
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Increases to Stamp Duty surcharges for investment properties, which rose from 3% to 5% in October 2024
The Budget is due to be announced in late October or early November.
Growing Tax Pressures on Landlords
If introduced, NI on rental profits would add to what is already a complex and heavy tax burden for landlords. At present:
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Landlords pay additional Stamp Duty when purchasing rental properties.
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Income tax is charged on rental profits, with only limited mortgage interest relief available.
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CGT is applied when selling investment properties, with the annual allowance reduced to just £3,000 and rates set at 18% or 24%, depending on income.
With frozen income tax thresholds since 2021, more landlords are being pushed into higher tax brackets, compounding costs. Coupled with ongoing property maintenance expenses, agency fees, void periods, and energy efficiency improvement requirements, many landlords are already facing squeezed margins.
Potential Impact on the Rental Market
Industry commentators warn that further tax increases may drive more landlords to sell up, reducing rental stock and pushing rents higher in an already supply-constrained market. Some also anticipate a rise in the number of landlords incorporating to manage their tax liabilities, which could reduce the overall effectiveness of the measure.
While the government’s aim is to generate significant additional revenue without raising headline rates of income tax, VAT, or NI for most workers, property professionals are urging policymakers to consider the potential knock-on effects for renters and housing availability.
With demand for rental homes forecast to grow significantly over the coming years, many in the sector are calling for a balanced approach that encourages investment in good-quality rental housing rather than deterring it through additional taxation.