NICs on Rental Income: Impact on Landlords

Leaks of the likely content of Chancellor Rachel Reeves' budget later this month are abounding - including rumours of charging landlords National Insurance Contributions on rental income for the first time.

The possibility of this radical overhaul of private landlord taxation comes from a government tip to journalists to test the optics around the end of August .

The change is a tight fit with Labour's policy to squeeze small buy-to-let landlords out of the market in favour of large corporates.

For instance, Lloyds Bank has developed a £2 billion rental portfolio, and other institutions are heading the same way, like insurance giant Legal & General and retailer John Lewis.

Although government sources are pushing the leak, the final details of making landlords pay National Insurance Contributions (NICs) are yet to be confirmed and may not make the final draft of the chancellor's speech on 26 November 2025.

Shrinking property profits

If she goes ahead and introduces NICS as proposed from April 6 next year, this is what the package currently looks like:

• 8 per cent NIC on rental profits up to £50,270
• an additional 2 per cent NIC on profits above that
• NICs would only apply to profits, not gross rental income

Tax experts at leading property consultancy Hamptons have crunched the numbers to show how charging NICS would impact a typical landlord earning £16,478 annual rental income, paying £7,875 for a mortgage, leaving a pre-tax profit of £3,495.

The 2025 figures are also compared with those of a typical landlord in 2015, which was the last year before successive governments started to change property tax rules.

• A basic-rate taxpayer currently pays £699 in income tax. With NICs added, this would more than double to £1,609, assuming their personal allowance is used up by other income.
• A higher-rate taxpayer would see their tax bill rise from £2,973 to £3,200, leaving £295 profit.

How NIC could change landlord tax

Chancellor wants £3 billion from landlords

Aneisha Beveridge, head of research at Hamptons, says: "Introducing NICs on rental income would mark another significant shift in how landlords are taxed and would undoubtedly squeeze profitability further.

"While the charge is expected to apply to profits, the definition of 'profit' is key. If calculated before mortgage interest relief, it would amplify the chances of higher-rate tax-paying landlords paying tax on properties that are loss-making.

"This proposal could have a greater impact on lower-income landlords, many of whom rely on rental income to supplement modest earnings or pensions."

Hamptons estimates introducing NICs for private landlords would raise around £1 billion, which is much less than the hoped-for £3 billion, because corporate landlords, who make up around 40 per cent of all private landlords, would be ineligible to pay.