"Recent increases in property taxes have already led to lower returns for landlords."
- Mark Stemp - partner in private clients, Crowe
Generally, industry experts warn that the move could erode investment appeal, reduce housing supply, and ultimately drive up rents for tenants already struggling with affordability.
Charlie Newsome, divisional director at Rathbones, believes the measure would mark a turning point for property as an asset class. He argues that: “Far from being ‘safe as houses’, the investment case for residential property has shifted dramatically. Slower price growth, higher borrowing costs and increasing regulation have combined to erode the appeal of property as an asset class. A new property tax could be the last nail in the coffin for property’s status as a viable investment and cause potentially tens of thousands of people planning for retirement to rethink their strategy.”
He also highlights the risk of unintended consequences, suggesting that a levy based on property values could penalise less well-off homeowners in high-value areas more harshly than wealthy owners in cheaper regions.
Picking up on the practical implications for landlords, Mark Stemp, partner in private clients at Crowe, points out that the tax would add to an already growing burden on landlords: “National Insurance applies to earned income, whereas rental profits are classed as unearned income and, in most cases, are perceived more as investment income than a business. Recent increases in property taxes have already led to lower returns for landlords. This is compounded by non-tax pressures, such as the new rules under the Rental Reform Bill and a requirement to increase the EPC rating, which will also eat into landlords’ returns. As a result, landlords are passing these additional costs onto tenants, making rent increases the likely consequence of further tax increases.”
Stemp warns that many private landlords are already considering selling parts of their portfolio, which risks contracting the rental market at a time when demand is strong.
Echoing this concern, Stemp’s colleague Nick Latimer, also a partner at Crowe, suggests the change could reshape the sector entirely:
“Applying National Insurance to landlords’ rental income runs the risk of placing dampeners on the property market by incentivising corporate ownership and dis-incentivising individual landlords. By discouraging ‘smaller’ landlords, we would expect reductions in available rental properties and more rent increases for tenants to grapple with.”
Meanwhile, Vann Vogstad, founder and CEO of COHO, warns that the effects could fall disproportionately on one group of landlords – and their tenants:
“The Chancellor’s reported plan to introduce National Insurance on rental income in the upcoming Autumn Budget is likely to hit HMO and shared-living landlords hardest. These landlords typically generate higher rental income per property than standard buy-to-let investors, meaning they’ll shoulder a particularly large share of the proposed 8% levy. […] The inevitable result would be a shrinking supply of rental properties and further upward pressure on rents at a time when tenants are already grappling with sky-high living costs.”
Vogstad stresses that tenants often pay the ultimate price for such measures, with HMO renters especially vulnerable given the stigma surrounding shared housing and the regulatory hurdles already in place.
The expert commentary from the property industry paints a consistent picture: applying National Insurance to landlords’ rental income may raise short-term revenue for the Treasury, but risks creating deeper problems in the housing market.
