Landlords May Face Extra Tax on Rents—What This Could Mean for Your Property Portfolio
The UK government is reportedly weighing a proposal to extend National Insurance (NI) contributions to include rental income—a source previously exempt. According to The Guardian, this potential move targets landlords’ “unearned income” as a way to help plug a projected £40 billion hole in public finances ahead of the autumn 2025 budget. If introduced, the reform could raise around £2 billion, though the real yield may be closer to £1 billion, since many landlords—particularly pensioners or those operating via company structures—would remain exempt.
Who Could Be Impacted — and How Much?
The Times suggests that ordinary individual landlords, especially those with profits around £16,500 and typical expenses, could see their tax bills almost double. A basic-rate taxpayer may see their liability rise from about £699 to £1,609, assuming an 8% NI rate on top of income tax.
However, exemptions would apply. Roughly 40% of UK landlords may not be affected, including pensioners and those who hold properties in limited companies.
Wider Market Impacts
Some landlords are voicing frustration. The Times highlighted one investor managing 17 flats who felt “unfairly targeted,” arguing that repeated tax changes are squeezing profitability and pushing smaller players to consider leaving the market. Data also indicates that sales of properties liable for Capital Gains Tax have more than doubled since 2016, while the landlord share of housing purchases has fallen from 15.7% to 9.6%.
If landlords reduce their activity, the supply of rental homes could contract, which in turn may put upward pressure on rents. The Guardian notes that uncertainty around housing policy is already cooling transactions, particularly at the higher-value end of the market. At the same time, MoneyWeek has pointed out that this proposal comes alongside discussions of broader property-related reforms, such as a possible national property tax, changes to Capital Gains Tax exemptions, and even replacing stamp duty.
Possible Responses From Landlords
Incorporating as a Limited Company
As The Times explains, operating through a limited company could potentially mitigate the impact of NI. However, this option is generally more viable for landlords with larger portfolios or higher profits.Reducing Portfolio Size or Exiting the Market
Tax and regulatory pressures may lead some landlords to reduce holdings. Industry commentary, including from UK Finance and TaxAssist Accountants, suggests many landlords are already weighing whether costs outweigh returns.Raising Rents to Offset Costs
The Times has warned that landlords might pass on higher costs through rent adjustments, while discussions on Reddit reflect concerns that an “8% tax on rental income” could translate into higher rent levels.
What It Could Mean for Your Property Portfolio
For investors, preparation and strategy are essential:
Run financial models to test how an NI levy might affect your margins.
Seek professional tax advice before making changes such as incorporation.
Keep a close eye on policy updates, as these proposals are not yet final and could evolve.
Explore diversification or restructuring, particularly if certain assets are more exposed to tax changes.
Conclusion
The possible introduction of NI contributions on rental income would represent a significant change in the way landlords are taxed in the UK. For many, it could mean tighter margins, tougher decisions, and a need for fresh strategies. For tenants, it might result in higher rents and fewer available homes.
As the government prepares its autumn budget, landlords may benefit from staying informed, assessing their exposure, and exploring options to adapt. In a shifting environment, resilience and foresight will be critical in turning challenges into opportunities.
Next Steps
👉Want to explore how market changes could impact your property portfolio?
Book a call with Shannon Hoang at SHPC for an initial discussion about your options.
Disclaimer
This article and any discussions offered are for information purposes only and do not constitute financial, tax, or investment advice. Readers should seek independent professional advice before making decisions relating to property investment or tax planning.
