Talks of Rachel Reeves’ Autumn Statement plans reveal landlords could face further taxes on rental income. Here, we discuss what we know so far.
The proposed plans
Landlords could be dealt a significant blow in this year’s Autumn Statement as the Treasury considers extending national insurance (NI) contributions to rental income. The move comes as Chancellor Rachel Reeves confronts a £40bn shortfall in public finances. The Treasury hopes this hike will raise a staggering £2bn.
Reeves vowed not to raise VAT, income tax, or national insurance rates as part of Labour’s election manifesto. However, applying NI to property income could be presented as a ‘loophole’ to expand the tax, rather than increase the rate.
The true cost for landlords
Currently, NI is not levied on income from property, savings, or pensions. It’s suspected that the 8% charge typically applied to wages could be moved to rental income.
Therefore, a landlord earning between £50,000 and £70,000 from their property portfolio could expect to face a further £1,000 to their annual tax bill.
The impact on property investors
The proposal to apply NI to rental income would have a serious knock-on effect on the wider buy to let sector.
Landlords have faced a plethora of challenges and changes to the market over the last few years, from higher borrowing costs and stricter affordability checks to increased regulation, with the Renters’ Rights Bill still looming.
In last year’s Autumn Statement, Reeves announced a surprise Stamp Duty Land Tax surcharge hike on investment property. Further punishing property investors will only strain renters more. Higher taxes will push landlords to increase their rents or exit the industry, exacerbating the housing crisis and tenant affordability.
Managing Director, Gavin Richardson, commented, “This is another ill-thought-out idea with numerous unintended consequences that could potentially have a negative impact on both Labour's housing plans and the housing sector in general.
Just how the Chancellor believes this will be managed is another issue altogether. Take, for example, a Limited Company with multiple directors and shareholders. Who, and by what proportion, will the NI apply, and who will administer it?
I’m hoping this is kite flying and Labour will realise they cannot continue to rob the PRS rather than work with them to solve the issues the sector is facing.”
Ben Beadle, the NRLA's Chief Executive, comments, “Analysis by Savills shows that up to one million new rental homes will be needed by 2031 to meet demand.
“Given this, the Chancellor should be using the tax system to encourage long-term investment in new, good-quality rental housing.”
The government’s disregard for the essential services that landlords provide is more than concerning. Property investors run a business, and we’re seeing many landlord clients re-evaluating their current portfolios to boost profitability amidst the ongoing changes.
Supporting landlords through the changes
Whilst these changes are not set in stone, many landlords will understandably be worried about what this means for their property portfolios going forward.
We can complete a Property Portfolio Review of your investments to ensure you’re on the most cost-effective rates to keep your mortgage costs down. We can also explore different opportunities, like raising capital to fund future investments or paying off outstanding loans on more expensive rates to help you save money.
Speak to an expert
If you’d like to discuss any of your property investment plans, call our experts on 0345 345 6788 or submit an enquiry here to see how we can help.
