Property specialists are raising concerns that additional taxes on landlords’ rental income could have serious knock-on effects for both the rental sector and the wider housing market.
Reports suggest that the Chancellor is considering the introduction of National Insurance (NI) charges on rental earnings as a means of generating an extra £2 billion for the Treasury.
According to The Times, officials are working on different ways to raise revenue without crossing the “red lines” that Rachel Reeves set out before the election, when she pledged not to increase taxes on what she described as “working people”.
Tom Bill, who heads up UK residential research at Knight Frank, warned that while the measure may not lose the government many votes, the burden would ultimately be felt by tenants.
He explained that with landlords already reducing their property holdings ahead of the upcoming Renters’ Rights Bill and stricter environmental requirements, any further financial pressure would likely reduce available stock and push rental prices higher.
Even those landlords who decide to stay in the sector could be forced to pass on the additional costs in other ways. Bill stressed that governments should recognise a basic principle: when you tax an activity, you often end up discouraging it.
Smaller private landlords, who do not use corporate structures to manage their portfolios, are particularly exposed. They face challenges from multiple fronts, including inflation, high borrowing costs, and tougher regulation, making them more vulnerable than larger property investors.
Several commentators have described the proposals as politically motivated rather than based on solid housing policy. Marc von Grundherr, director at Benham & Reeves, argued that squeezing smaller landlords further will only drive them to leave the market or restructure their holdings.
He added that with rental supply already under pressure, tenants are the ones ultimately paying the price. Policies that risk such damaging unintended consequences, he suggested, require far greater scrutiny.
Research by Savills indicates that demand for rental housing will remain strong, with up to one million additional homes needed by 2031 to keep pace with demand, particularly from young families across England and Wales.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), warned that increasing taxes in this way would do little more than push rents higher, directly impacting the very households the government claims to want to protect.
Sam Humphreys, Head of M&A at Dwelly, pointed out that many landlords already operate on slim margins. Adding NI on top of existing pressures could be the tipping point that forces them out of the market.
He cautioned that once rental stock is lost, it is extremely difficult to replace, leaving tenants facing higher rents and fewer choices. Instead of imposing more taxes, Humphreys suggested that the government should focus on encouraging supply to improve affordability.
A survey conducted earlier this year by Handelsbanken found that about one-third of small landlords were already planning to exit the sector, while nearly nine in ten expressed little or no confidence in the current rental market.
Shaun Moore, tax and financial planning expert at Quilter, echoed the concerns, saying that if NI is applied, the inevitable imbalance between demand and supply would drive rents upwards.
He also noted that many landlords would likely restructure by moving their properties into limited companies to offset the impact, a trend that could significantly reduce the government’s expected tax revenue.
Moore concluded that while the policy may be aimed at increasing income for the Treasury, its unintended consequences for both tenants and the wider housing market could be damaging and far-reaching.
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