The Intermediary – September 2025 - Flipbook - Page 37
BUY-TO-LET
In focus
Barking up the
wrong money tree
A
s night follows day
ahead of the Budget
on 26th November,
we now have the
latest rumours of yet
more tax hikes on
the rental market. Whether reports
of plans to charge National Insurance
(NI) on rental income are serious or
not, we will have to wait and see.
If the Chancellor really is
considering taking this step, it will be
renters who pay the price.
That the Government is in a
financial pickle is not disputed.
According to some estimates, the
Treasury faces a £40bn black hole in
the public finances.
The question is whether slapping NI
on rental income should be part of the
solution to tackle this deficit. Based
on what we have heard, the answer to
that is no for several reasons.
Unfair figures
First, the numbers simply do not stack
up. According to the reports in The
Times, the most common property
income bracket is £50,000 to £70,000.
The validity of this claim is highly
questionable, given the Government’s
latest English Private Landlord Survey
shows that average gross rental
income for landlords is £19,200 a year.
The net figure is much less.
The proposal seems to be predicated
on the age-old and somewhat lazy
assumption that landlords are one
homogeneous mass of wealthy
individuals. In reality, 93% of
landlords are individuals – 45% own
just one rental property, and 38% own
between two and four. These are not
the deep-pocketed property magnates
that some imagine.
Second, the reported proposals fail
the test of fairness. It will be tenants
who pay the price. As the former head
of the Institute for Fiscal Studies, Paul
Johnson, has made crystal clear: “The
more harshly that landlords are taxed,
the higher rents will be.”
It is not immediately clear how that
can be fair to tenants.
Indeed, as Professor David Miles,
now a member of the Budget
Responsibility Commiee at the Office
for Budget Responsibility, has noted,
making investment in rental housing
less aractive will only push up rents,
making it harder still for young people
to save for a home of their own.
The NI proposal also fails the test
of fairness in other ways. Some
42% of landlords cite a contribution
to a pension as the reason for
renting property out, meaning the
rumoured changes would amount
to an extra tax on pensions, at odds
with the treatment afforded to
other sorts of retirement provision,
and in contradiction to the general
encouragement to prepare for our
later years.
Another 42% of landlords choose
to invest in property instead of other
assets such as shares or bonds. Yet NI
is not paid on any other savings or
investment. This would, therefore,
amount to a selective tax raid on
property-based savings.
Third, applying National Insurance
on rental income will do nothing to
support the Government’s ambitions
to secure economic growth.
A support sector
The private rented sector (PRS) plays
a vital role in supporting swi access
for many to new educational and
work opportunities. A report for
the NRLA by the former Treasury
official and Head of Housing at Policy
Exchange, Chris Walker, hights that
the PRS “supports the efficient use
of the housing stock for workers in
proximity to places of work and,
in so doing, could be supporting
opportunity, career progression
and productivity.”
Further data from the accountancy
firm PwC also suggests that small
and medium-sized (SME) landlords
support almost 400,000 jobs across
BEN BEADLE
is chief executive at
the National Residential
Landlords Association
the UK, including those in
the construction and building
maintenance industries. According to
Aldermore bank, landlords spend an
average of just over £6,000 a year on
local services.
Applying National Insurance on
rental income risks further slowing
investment in the sector, undermining
efforts to meet the demand for up to
one million new homes to rent by
2031, as projected by Savills.
The Chancellor has a choice:
hike taxes still further on the rental
market that will only serve to hurt
tenants, or take a more strategic and
long-term approach. Rather than yet
another piecemeal tax grab, she could
reform the tax system to encourage
much-needed investment in energy
efficiency and supply.
She could adopt the welcome calls
by the Commiee on Fuel Poverty,
among others, for the tax system to
actively support and encourage the
investments in energy efficiency
improvements the Government wants
to see in rented housing.
She could look at how Capital Gains
Tax allowances could be beer used to
encourage long-term investment in
new, decent quality rented housing,
as opposed to short-term speculative
investments.
And she could consider how Stamp
Duty could be reformed to encourage
and support landlords to bring back
into use some of the more than quarter
of a million long-term empty homes
in England.
The choice for the Government is
stark. Back investment in the homes
renters need now, or find rents hiked
further in the future. ●
September 2025 | The Intermediary
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