Landlords could be hit with new national insurance charges on rental income under plans being considered by the Treasury.
The Times reports that the move is being examined as Chancellor Rachel Reeves searches for ways to plug a £40billion hole in the public finances without breaching her election “red lines” on VAT, income tax and NI rates.
Officials are said to be looking at extending national insurance to “unearned income” such as rent, a change that could raise around £2billion.
At present, earnings from property, pensions and savings are largely exempt from NI, which applies to wages at 8%. Reeves’s allies argue that widening the scope of NI would not count as a rate rise, likening the move to last year’s decision to put VAT on private school fees.
The idea is not new. The Resolution Foundation think tank first floated it last year, under the leadership of Torsten Bell – now a Labour MP and a key figure in Reeves’s budget preparations.
At the time Reeves dismissed the proposal, but it is understood to be back on the table this autumn amid worsening borrowing costs and pressure on government debt.
Critics warn the change could backfire by driving landlords out of the market, reducing the supply of rental properties and pushing up rents.