Reeves urged to launch tax raid on landlords

Newsletter issue – July 2025

Labour MPs and influential advisers are urging Chancellor Rachel Reeves to “launch a tax raid” on landlords as part of efforts to fill a fiscal gap without breaking the party’s manifesto commitment against increasing taxes on “working people”.

There are three proposed tax measures:

1. Charging National Insurance on Rental Income:

Unlike most earnings (from employment or self-employment), rental income is classified as passive and isn’t subject to National Insurance. Imposing NI on it would align landlords’ income closer to other forms of employment earnings.

2. Introducing a Separate Tax Band for Rental Income:

This would create a distinct taxation category for rental income, potentially imposing higher rates to ensure the income is taxed in a manner consistent with other types of earnings.

3. Levying VAT on Residential Property Lettings:

Applying VAT to rental income from residential lettings is another method proposed to increase government revenue from property investors.

This has naturally raised concerns from the landlord community: The National Residential Landlords Association argues that landlords are already paying income tax on rental earnings. Additional taxation could not only add complexity to the system but might also deter investment, potentially worsening the housing crisis.

However, some tax experts emphasize that taxing unearned income like rent more like wages could create a more consistent and equitable tax system.