The government’s latest Budget proposal to extend National Insurance (NI) to rental profits has sparked debate across the property industry. Marketed as a measure to raise £2 billion from so-called “unearned income,” the policy may sound like a simple revenue boost. But behind the headlines lies a risk of unintended consequences for landlords, tenants, and the wider housing market.
What’s at Stake for Landlords
Landlords have already shouldered significant tax and regulatory changes over the last decade. From mortgage interest relief cuts, stamp duty surcharges, selective licensing schemes, and the upcoming EPC C energy efficiency deadline, costs are rising year after year.
For many landlords, particularly those with just one or two properties, rental income isn’t a luxury, it’s part of their long-term financial planning. Government figures show that a typical landlord earns around £19,200 per year in gross rental income, and 42% say letting property contributes towards their pension.
If NI is applied to rental profits, even for retired landlords, it could mean a heavier tax burden on people who are already paying Income Tax on their earnings from property.
If you’re concerned about how future tax changes could affect your investments, our Property Management services can help you navigate regulation and keep your properties compliant.
How the Proposal Could Affect Tenants
Economic logic is clear, when costs go up, prices follow. Some landlords may pass new NI costs on to tenants in the form of higher rents. Others could decide that letting property is no longer worthwhile, choosing to sell instead. Either way, the rental supply shrinks, and tenants face rising rents in an already stretched market.
Estimates suggest the UK needs up to a million additional rental homes by 2031 to meet demand. But with fewer private landlords entering or staying in the market, the risk is that affordability pressures only worsen.
Thinking about selling instead of renting out? Our free property valuation service can help you understand your options.
A Smarter Approach to Tax Policy
If the government does proceed with this proposal, many in the industry argue for three safeguards:
- Tapered NI rates so small-scale landlords aren’t hit as hard as large corporate investors.
- Tax incentives for reinvestment in areas like energy efficiency and safety standards, so any revenue raised benefits housing quality.
- Clear, long-term policy to give landlords and investors confidence rather than sudden, disruptive changes.
Why This Matters for the North East
Here in the North East, where rental demand continues to grow but housing supply struggles to keep pace, the impact could be significant. Policies that discourage landlords risk reducing the number of homes available for students, professionals, and families, at a time when affordability is already a challenge.
If you’re a landlord considering your next steps, our lettings services can help you make informed decisions in a fast-changing market.
Final Thoughts
The rental sector needs stability, investment, and more homes, not sudden tax changes that could drive landlords out of the market. Extending NI to rental profits might fill headlines, but it risks making life harder for both landlords and tenants while failing to solve the UK’s housing challenges.
Landlords, investors, and policymakers alike need a tax system that supports long-term planning, not one that creates uncertainty in a sector already under pressure.
Source: Property Reporter, NI on Rental Profits Would Be a Raid on Pensions and Investment