Landlords are facing renewed pressure as the New Economics Foundation (NEF) calls for National Insurance Contributions (NICs) to be extended to rental income. This proposal comes amid ongoing challenges for landlords, including compliance with the Renters’ Rights Act and rising costs.

National Insurance on rental income proposed

The NEF, a left-leaning think tank, has criticised the current exemption of landlords from paying National Insurance on rental income as “unwarranted.” According to the NEF, introducing NICs on rental profits could raise approximately £3.2 billion and align landlords’ contributions more closely with those of wage earners.

George Bangham, head of social policy at NEF, explained: “We all expect to pay National Insurance on our wages, in order to contribute to vital services like the NHS. But when landlords make money from rental income, they are not asked to contribute the same as everyone else. This is clearly unfair: income from renting out a property should be treated the same as income from work.”

Impact on buy-to-let investments

If implemented, this change would alter the financial calculations behind many buy-to-let investments. Landlords are already contending with higher borrowing costs, recent tax changes, and the new Renters’ Rights Act regime. Adding a National Insurance levy on rental income could further squeeze profit margins and affect investment decisions.

Taxing profits rather than revenue

The NEF suggests that any NICs on landlords should be paired with a mortgage interest deduction, ensuring that tax is applied to profits rather than gross rental income. This approach aims to avoid penalising landlords on revenue before expenses.

A similar proposal was reported last year, with discussions around raising around £2 billion from landlords. At that time, Treasury sources indicated that Chancellor Rachel Reeves was interested in targeting “unearned income” but sought to avoid breaking pre-election pledges not to increase VAT, income tax, or existing National Insurance rates.

Concerns from landlord groups

Landlord organisations have warned that additional tax burdens would ultimately affect tenants as well as landlords. The National Residential Landlords Association (NRLA) described a National Insurance levy as “disastrous” for both landlords and tenants, cautioning that increased costs could be passed on through higher rents.

Paul Shamplina of Landlord Action expressed concern that such a move might accelerate landlords’ exit from the private rented sector, reducing the availability of rental properties.

Ongoing tax pressures and compliance challenges

Both Mr Shamplina and the NRLA highlight the cumulative effect of recent tax changes, including a 2% income tax surcharge on rental income, as placing significant pressure on landlords’ margins and future investment capacity.

This renewed tax proposal arrives as landlords continue to navigate several Renters’ Rights Act deadlines. The final court deadline for pre-Act Section 21 and Section 8 eviction notices is 31 July 2026. Additionally, the Private Rented Sector database is scheduled for regional rollout later this year, with mandatory registration expected by 2027. Compulsory membership of the new Landlord Ombudsman is anticipated by the end of 2028.

Failure to meet these requirements could result in fines of up to £40,000, adding to the compliance risks landlords face alongside any potential new tax obligations.

What this means for landlords

Landlords should prepare for the possibility of increased tax liabilities on rental income, which may affect profitability and investment decisions. The proposed NICs, combined with existing tax surcharges and compliance costs, could lead to higher rents as landlords seek to offset expenses. Staying informed and engaged with policy developments will be essential to managing these evolving challenges.

Source: Based on reporting from The Daily Telegraph

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