Brits may have to shell out extra money as experts warn that Labour’s proposed rental tax could leave a massive hole in their pockets. The Labour Government is planning to introduce a major change to the way landlords are taxed.
Chancellor Rachel Reeves is considering a new plan for the upcoming Autumn Budget that could see landlords paying National Insurance (NI) on their rental income for the first time. The suggested rate is around 8%, similar to what employees pay on other earnings. This move is aimed at raising extra funds for public services without increasing the overall tax rates, and it could generate up to £2 billion for the Treasury.
However, the idea has sparked debate, with critics warning it might lead to higher rents if landlords pass the cost on to tenants. A latest research from Inventory Base found that the UK landlords will face an average NI bill of up to £885 per property per year if Labour’s rental tax proposal is passed into law.
Landlords in London will face the biggest NI bill of £885 per property, based on post-costs rental income of £11,060, while in the East of England, landlords are looking at an average tax bill of £802 a year.
In the South East, where rental income after maintenance expenses averages £9,900 per property, the average cost of the proposed tax stands at £792, followed by the South West (£750), North East (£684), East Midlands (£680), West Midlands (£677), North West (£646), Wales (£608), and Yorkshire & Humber (£606).
Sián Hemming-Metcalfe, operations director at Inventory Base, said: “Landlords are already trying to guesstimate and juggle any potential financial fallout of the Renters’ Rights Bill, so slapping an NI charge on rental income feels less like policy and more like punishment.
“The private rental sector thrives on stability – tenants need secure homes, landlords need predictable returns.
“Add another layer of tax and all you create is uncertainty, and uncertainty drives good landlords out of the market. That doesn’t protect tenants, it weakens an already fragile system.
“If the Government is serious about raising standards, it should be focusing on ways of maintaining the protections and standards that tenants are being promised and backing landlords to deliver, not taxing them into retreat.”