The Government is considering a major change to the way landlords are taxed, with Chancellor Rachel Reeves weighing up plans to apply National Insurance (NI) contributions to rental income as part of her upcoming Autumn Budget.
Currently, rental income is subject to income tax but not NI. However, by expanding NI to cover this additional source of earnings, the Treasury could raise an estimated £2 billion a year. A landlord earning between £50,000 and £70,000 from property could face an extra £1,000 in tax annually.
The measure is being put forward as part of efforts to plug a £40 billion fiscal shortfall while maintaining Labour’s pledge not to raise the main rates of VAT, income tax, or NI. Critics, however, argue that such a move would risk destabilising the rental market, hitting small and medium-sized landlords particularly hard and ultimately feeding through to tenants in the form of higher rents and reduced supply.
Vann Vogstad, Found and CEO of COHO, explains why HMO landlords and tenants will be hit hardest, saying, “The Chancellor’s reported plan to introduce National Insurance on rental income in the upcoming Autumn Budget is likely to hit HMO and shared-living landlords hardest. These landlords typically generate higher rental income per property than standard buy-to-let investors, meaning they’ll shoulder a particularly large share of the proposed 8% levy.
While this might seem like a clever revenue-raising move from the Treasury’s perspective, it risks triggering serious consequences for the rental market. For many landlords, already squeezed by years of tightening regulation and tax changes, this could be the final straw, prompting them to exit the sector altogether.
The inevitable result would be a shrinking supply of rental properties and further upward pressure on rents at a time when tenants are already grappling with sky-high living costs. Even those landlords who stay in the market are likely to seek ways to recoup their losses, and raising rents will be the most direct route.
Tenants always seem to bear the brunt of government efforts to extract more from the rental sector. In this case, HMO tenants could be particularly vulnerable. These properties already face mounting barriers, including growing resistance from local authorities influenced by negative media narratives around shared housing. It would be a real blow to see this vital part of the market unnecessarily eroded.
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