Landlords could face £2billion tax increase under Rachel Reeves plans to plug black hole

Landlords could face a tax increase under plans being considered to target "unearned income".

According to The Times, officials are looking at proposals for applying national insurance (NI) to rental income to raise £2billion. Earnings from property, pensions and savings are largely exempt from NI contributions, which apply to other forms of income for employees at a rate of 8%.

This could now be expanded to include rental income, with Labour insiders suggesting property income was "a significant potential extra source of funds " and landlords were a way of targeting "unearned revenue".

The Treasury are are considering options for tax rises while seeking to avoid breaking the "red lines" set by the Chancellor Rachel Reeves before the general election not to put up VAT, income tax or national insurance.

Official figures show there was £27billion of net property income in 2022-23. An extra levy of 8 per cent would have generated £2.16billion. Asked about the reports on Thursday, a Government minister refused to rule them out.

Stephen Morgan, education minister, told Times Radio: “Obviously taxation policies are a matter for the Chancellor of the Exchequer, and she will set out more detail in the budget later this year. I want to make sure that our budget is based on our Labour values, and that is what Rachel Reeves will deliver.

“It’s not for me to comment on speculation. Our focus is on driving growth in the economy and delivering for working people up and down the country.”

Speaking later to Sky News, Mr Morgan said: “We’re focused on growing the economy. Fixing the foundations of the country, restoring public service and that decade of national renewal. ’m afraid you will have to wait until the budget later this year.”

The proposals have been backed by MPs and think tanks, with Adam Corlett, principal economist at the Resolution Foundation, saying there is “no good reason why landlords should face lower tax rates than their tenants."

The Treasury declined to comment on potential NI changes and said the focus was on economic growth.