Landlords may be facing a potential tax hike as part of discussions to target income that is considered “unearned”. The Times reports that officials are exploring the idea of applying national insurance to rental income in order to generate £2 billion. Unlike other forms of income for employees, such as earnings from property, pensions, and savings, rental income is currently largely exempt from national insurance contributions.
There are suggestions within the Labour party that including rental income in national insurance contributions could provide a significant additional revenue stream. This move would allow targeting of “unearned revenue” from landlords. The Treasury is reportedly exploring various options for tax increases while attempting to adhere to the red lines set by Chancellor Rachel Reeves, who had previously stated not to raise VAT, income tax, or national insurance before the general election.
Official data reveals that there was £27 billion in net property income in the 2022-23 period. Applying an additional 8% levy on this income could have resulted in £2.16 billion in revenue. When asked about these reports, a Government minister did not rule out the possibility.
Education minister Stephen Morgan mentioned on Times Radio that tax policies are under the jurisdiction of the Chancellor of the Exchequer, Rachel Reeves, who will provide more details in the upcoming budget. He emphasized the focus on aligning the budget with Labour values and driving economic growth for the benefit of the people across the country.
In a separate interview with Sky News, Mr. Morgan reiterated the commitment to economic growth and national renewal, highlighting the importance of waiting for the budget announcement later in the year.
The proposal to include rental income in national insurance contributions has gained support from MPs and think tanks. Adam Corlett from the Resolution Foundation stated that there is no valid reason for landlords to face lower tax rates than their tenants. The Treasury refrained from commenting on potential changes to national insurance, stating that the primary focus remains on fostering economic growth.
