The New Economics Foundation has called on the Labour government to extend National Insurance contributions to landlords’ rental income, a measure the think tank estimates could generate £3.2 billion in revenue.
George Bangham, Head of Social Policy at the foundation, which has established links to Labour, argued that rental income should be treated equivalently to employment income for tax purposes. “When landlords make money from rental income, they are not asked to contribute the same as everyone else,” he stated.
Proposal details
The NEF report recommends closing what it terms “unwarranted tax exemptions given to landlords” by extending the National Insurance base to include income from rental properties. The proposal includes a mortgage interest deduction provision, which would ensure landlords pay tax on profits rather than revenues.
The suggestion comes amid ongoing uncertainty in the UK property market, where landlords have faced multiple regulatory and tax changes in recent years.
Industry response
Chris Norris, Chief Policy Officer at the National Residential Landlords Association, told the Telegraph that implementing NICs on rental income “would be disastrous for their balance sheets.” He warned that landlords facing squeezed margins would likely pass the additional tax burden to tenants through higher rents.
Paul Shamplina, Founder of Landlord Action, echoed concerns about unintended consequences. “The reality is that landlords have already been taxed very heavily, and these types of policies have unintended consequences,” he said, adding that the proposal could accelerate landlord exits from the sector.
The debate reflects broader tensions in the private rental sector, where regulatory complexity has increased alongside tax changes including the phased removal of mortgage interest tax relief and higher stamp duty rates for additional properties.
Market implications
Industry representatives argue that further taxation could reduce rental supply at a time when demand remains high. The proposal has not been adopted as government policy, and Labour has not indicated whether it will pursue the recommendation.
The think tank’s intervention adds to ongoing discussions about taxation policy in the rental sector, which has seen substantial regulatory change over the past decade. The outcome of this debate could significantly impact investment decisions in the buy-to-let market and rental affordability for tenants.
