Extending National Insurance to landlords’ rental income would hit individuals, comprising 81% of market.

That’s the warning from the Intermediary Mortgage Lenders Association (IMLA) which says the move – suggested as a possible Budget policy to be announced next month – would have serious unintended consequences for smaller personal landlords operating in their own names.

The association says such a move would not apply to incorporated landlords, creating a two-tier system that would widen the gulf between individual and corporate property owners. For many smaller landlords, already squeezed by recent tax and regulatory changes, the impact could be devastating.

The proposal, floated as part of pre-Budget speculation, could push many landlords’ effective tax rates to unsustainable levels. IMLA’s research shows that 58% of higher-rate taxpayers letting properties in their own name would face total tax and NI bills exceeding their entire rental profit and would be paying more than 100% back to the Treasury.

Landlords have already been hit by the loss of mortgage interest relief, higher capital gains tax bills, a stamp duty surcharge and an increasingly demanding regulatory environment. Imposing NI on top could further reduce the number of buy-to-let properties, which has already fallen by more than 110,000 since 2022, and drive up rents as supply continues to contract.

IMLA’s analysis concludes that while extending NI to landlords might raise around £2.2 billion annually, the damage to rental supply, market confidence and tenant affordability would far outweigh the benefit.

At a time when the government is seeking growth and stability, IMLA argues that penalising smaller landlords risks undermining both, by reducing investment, shrinking housing choice and increasing upward pressure on rents.

Kate Davies, executive director of IMLA, says: “Extending National Insurance to landlords’ rental income may appear an easy way to raise money, but in practice it would hit exactly the wrong people. It would punish smaller, often part-time landlords who provide homes for more than four million UK households, while leaving larger incorporated operators untouched. That is both unfair and economically counterproductive.

“This would be a short-sighted and self-defeating move. Fewer rental homes mean higher rents, less mobility, and more pressure on public housing. At a time when the UK needs more investment in property, not less, this proposal risks driving it away.”