Comment by Dr Neil Cobbold, Commercial Director, Reapit UK & I
Another Budget season, another tax test flight. This time it’s the proposal to extend National Insurance (NI) to rental profits, a move briefed as raising £2bn from so-called “unearned income”. It sounds neat and tidy as a media message. In practice, it would be a raid on pensions and investment that risks shrinking rental supply further, pushing up rents and deepening the affordability crisis.
Last year’s English Private Landlord Survey (EPLS) showed the typical gross rental income is around £19,200 a year – these are the Government’s own figures. Nearly half of landlords own just one property, most of the rest own two to four. This is a diverse, largely small-scale group, many of whom are older and part-time, providing the everyday homes that most tenants actually live in.
Again, according to the EPLS, 42% of landlords say they let property to contribute to a pension. In other words, rental income is their long-term savings plan. Today, NI applies to earned income only up to State Pension age; it does not apply to pension income or most savings returns. Singling out rental profits for NI even after retirement is fiscally inconsistent and unfair.
Supply tightens and rents rise
Landlords already pay Income Tax on profits and have weathered years of fiscal and regulatory changes: the restriction of mortgage interest relief, higher stamp duty on purchases, tougher standards, selective licensing. They also now face the Renters’ Rights Bill on the horizon, as well as the hefty cost of bringing rented homes up to a minimum EPC C by 2030 – revealed by Reapit’s analysis to be £24 billion.
When you tax an activity, you get less of it. If this proposal lands, some landlords will pass on part or all of the cost to tenants. Others will decide the return is no longer worth it and sell up. Either way, supply tightens and rents rise. As Paul Johnson, former head of the IFS, has said: the harsher you tax landlords, the higher rents go. We’ve seen that logic play out across the market already.
Meanwhile, demand isn’t standing still. Independent estimates suggest we need up to a million additional rental homes by 2031 just to keep pace. Build-to-Rent can play a role, but small and mid-sized private landlords are still doing the heavy lifting supplying the homes we need. Policies that discourage them will simply reduce the number of homes available in the short and medium term.
There’s also a question of priorities. If the fiscal hole is closer to £40bn, a narrowly targeted NI on rents is a single stitch in a gaping tear — and one with obvious drawbacks. If you push more cost into the system without expanding supply, you exacerbate the affordability pressures you’re trying to ease.
Safeguards are essential
None of this is an argument against fair taxation. It’s an argument for consistency and coherence. If ministers believe investment income should contribute more, say so and legislate with clear principles across asset classes, phased over time. Don’t pick off one category that doubles as pension provision for hundreds of thousands of households and pretend that’s a housing solution.
If the government proceeds, safeguards are essential. First, a tapered NI for small profits so you don’t hammer the median landlord on £19,200 gross. Second, targeted relief for verified reinvestment — energy efficiency, decent-home upgrades, safety standards — so any new tax actively encourages better quality housing rather than discouraging housing provision. Third, clarity and stability: announce early, consult properly and avoid constant tinkering. Housing is a long-term asset, and investors need predictability to plan and deliver.
Ultimately, the question is simple: do we want more good-quality, affordable rented homes, or do we want a symbolic revenue measure that shrinks the market tenants rely on? Institutions and responsible private landlords alike need confidence to invest. Treating rental housing as a convenient piggy bank might make a headline. It won’t build the homes we need. It won’t fill the Chancellor’s black hole, either.
