In recent weeks, reports have suggested the Treasury is exploring whether to expand National Insurance (NI) to include landlords’ rental profits, an idea briefed ahead of the autumn budget and trailed as raising roughly £2bn. At the time of writing it’s still unconfirmed. But even as a test to gauge reaction, it’s a troubling signal.

I’ll be blunt. It’s already hard for many property investors and landlords to make the numbers stack up. Layering NI on top of existing tax and regulatory changes feels like yet another cash‑grab aimed at a sector that government simultaneously relies on and berates. In one breath ministers lament a lack of suitable housing; in the next they float ideas that drive suppliers of rented homes to the exit. If you reduce the supply of something in short order, prices go up. That isn’t ideology, it’s basic economics.

What’s actually being suggested?

The rumour is to apply NI to rental profits, mirroring NI on employment income (8% up to a threshold and 2% above). Hamptons’ research summarises the likely mechanics as 8% on profits up to around £50k and 2% thereafter. The crucial detail is whether “profit” would be calculated before or after mortgage interest, because that changes the hit materially for leveraged landlords.

For now, officials are saying little beyond the usual “wait for the budget”. That matters, as policy made by leaks creates paralysis today without delivering revenue tomorrow. Creating instability and uncertainty in any market threatens at best inactivity and at worst activity that drives people out of the sector.

A tax that misses its own target

If the aim is £2bn a year, the numbers look optimistic. Hamptons estimates around 40% of landlords wouldn’t pay NI on rents, either because they’re pensioners (NI is not due after state pension age) or because they hold properties in company structures. On their modelling, that reduces the yield to “just over £1bn”, roughly half the figure being briefed. You end up with a blunt, distortionary levy that under‑delivers on receipts while over‑delivering on unintended consequences.

The supply paradox

We already have a rental shortage in many local markets. More landlords selling up doesn’t guarantee more homes for would‑be buyers and it certainly doesn’t guarantee homes that match renters’ needs or budgets. Many households renting today can’t buy right now for a range of reasons: deposit constraints, credit history, income volatility, or simply local price‑to‑income ratios.

Where exactly do those people live if we shrink the private rented sector faster than we can expand social and affordable supply? Early reactions from market analysts have been consistent: tax the activity, get less of it and then watch rents take the strain.

Let’s be realistic. Landlords with thin margins will try to pass some or all of the extra cost into rents over time. Others will exit. Both routes hurt tenants.

Conclusion

Let’s hope this stays in the rumour column and that it’s the legacy of Angela Rayner’s stewardship and is removed from prospective Government policy. The UK needs stability in housing, on the owner‑occupier side and in the private rented sector. Landlords are a vital cog in that system.

Driving them out without credible, faster‑acting ways to replace the homes they provide spells trouble for tenants first and foremost. If the test for any tax change is “does it raise what we think, without doing more harm than good?”, expanding NI to rents fails on both counts.

Hiten Ganatra is managing director at Visionary Finance