The Treasury is reportedly considering a tax increase on landlords by imposing national insurance on rental income ahead of Rachel Reeves’ autumn budget.
Officials are said to be looking at proposals to hike a levy on property earnings in the hope of raising £2 billion as the Chancellor searches for ways to raise cash amid dire warnings about the state of the public finances.
The move is being backed by some Labour MPs and Government aides, with some proponents saying that landlords were seen as a way of targeting “unearned revenue”, The Times reported.
Employee national insurance contributions (NICs) on other earnings stand at 8%, but drop to 2% above a £50,270 threshold.
Allies of Ms Reeves are said to have argued the proposals avoid breaking the Labour pledge not to raise VAT, income tax or NICs because they mark an expansion of the income to which this levy is applied, rather than an increase in its rate, and could generate around £2 billion.
Officials are seeking to explore ways to raise revenue without crossing these three “red lines,” which limit Ms Reeves’ options when it comes to balancing the books.
The scale of the challenge facing her in the autumn budget was illustrated by the NIESR economic think tank warning this month that Ms Reeves is set for a £41 billion shortfall on her self-imposed rule of balancing day-to-day spending with tax receipts in 2029-30.
A Treasury spokesperson said the best way to strengthen the public finances was by growing the economy, adding: “Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8 billion and cut borrowing by £3.4 billion.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”
