If National Insurance was charged on landlords’ rental income that would have dire consequences for personal landlords operating in their own names.
That is according to the Intermediary Mortgage Lenders Association (IMLA), which warned that it would create a two-tier system that would widen the gulf between individual and corporate property owners.
The proposal, floated as part of pre-Budget speculation, could push many landlords’ effective tax rates to unsustainable levels.
IMLA’s research shows that 58% of higher-rate taxpayers letting properties in their own name would face total tax and NI bills exceeding their entire rental profit and would be paying more than 100% back to the Treasury.
Kate Davies, executive director of IMLA, said: “Extending National Insurance to landlords’ rental income may appear an easy way to raise money, but in practice it would hit exactly the wrong people.
“It would punish smaller, often part-time landlords who provide homes for more than four million UK households, while leaving larger incorporated operators untouched. That is both unfair and economically counterproductive.
“This would be a short-sighted and self-defeating move. Fewer rental homes mean higher rents, less mobility, and more pressure on public housing. At a time when the UK needs more investment in property, not less, this proposal risks driving it away.”
While extending National Insurance to landlords might raise around £2.2 billion annually, the association argued that damage to rental supply, market confidence and tenant affordability would far outweigh the benefit.
At a time when the government is seeking growth and stability, IMLA warned that penalising smaller landlords risks undermining both, by reducing investment, shrinking housing choice and increasing upward pressure on rents.
