Labour considers National Insurance on rental income labelled ‘unearned’
Landlords could face new taxes under Labour’s plans to apply National Insurance contributions (NICs) to rental income, with Treasury insiders describing rents as “unearned income”. The proposal, first reported in The Times, suggests an 8% levy on the UK’s £27 billion in net property income, potentially raising £2 billion a year.
While this framing resonates with some voters particularly younger renters frustrated by high housing costs it has drawn sharp criticism from landlords and industry groups. They argue that rental income is far from passive, and that small landlords make up the majority of the sector.
The debate cuts to the heart of a political promise made by Prime Minister Keir Starmer: not to raise taxes on “working people”. By excluding landlords from that category, Labour is drawing on a historic distinction between “earned” wages and “unearned” income from property and investments.
The origins of ‘unearned income’
The idea of treating property income as “unearned” has deep roots. In the late 19th century, US political economist Henry George popularised the concept in his landmark book Progress and Poverty.
George argued that while industrial and technological advances benefited society, the wealth they generated was often captured disproportionately by landowners. This concentration of wealth, he said, entrenched poverty. His proposed solution was higher taxation of land and property values.
More than a century later, his ideas continue to influence debates in Britain. Within Labour, the concept of “unearned income” provides a framework for targeting property wealth while preserving Starmer’s pledge not to tax wages.
Labour’s political framing
Labour officials say the proposed National Insurance charge would not affect “working people” reliant on wages, but rather those whose income stems from rental property.
This distinction, however, is controversial. Critics argue it unfairly stigmatises landlords, many of whom are not large-scale investors. Some are retirees relying on modest rental income in place of a pension; others are working professionals who own one or two properties as part of long-term financial planning.
The National Residential Landlords Association (NRLA) has warned that additional taxes would inevitably be passed on to tenants through higher rents, potentially worsening the housing crisis.
Landlord demographics: small-scale operators dominate
Government surveys show that the vast majority of landlords are small-scale, typically letting just one or two properties. Exact figures vary, but industry estimates suggest most landlords fall into this category rather than being large portfolio investors.
While earlier reports cited figures such as “over 90% of landlords own fewer than two properties” and “2.5 million landlords in total”, these numbers could not be independently verified. What is clear, however, is that the UK rental market is heavily reliant on individuals rather than corporate landlords. Most landlords manage one or two properties rather than large portfolios. For more insights on tax responsibilities and allowable expenses for small landlords, see our detailed guide on what business expenses landlords can claim.
This raises a question: does taxing rental income as “unearned” unfairly penalise ordinary people supplementing their wages or pensions?
Landlord perspectives on the ‘unearned’ label
Landlords argue that the idea of rental income requiring “no work” is misleading. Being a landlord, they say, involves:
- Responding to maintenance emergencies such as broken boilers or leaks.
- Handling tenant issues, often outside of normal working hours.
- Managing paperwork, regulations, and property upkeep.
Industry voices stress that this is active responsibility, not passive wealth. The assumption that landlords are simply “clipping coupons” while money rolls in is, they argue, inaccurate particularly for those managing small portfolios.
Why the policy resonates with voters
Despite landlord pushback, the framing of rental income as “unearned” has strong political appeal. Younger voters, many of whom are renters, see their pay packets drained by housing costs while landlords benefit from property appreciation.
For Labour, targeting landlords fits neatly with Starmer’s positioning: protecting employees from tax rises while asking asset-owners to contribute more. It plays well with members of the party’s activist base who are keen to see wealth redistribution.
But this rhetoric carries risks. Policies that deter small landlords could reduce rental supply, pushing rents even higher for tenants the very group Labour seeks to protect.
The bigger debate: fairness in taxation
The question of how to balance taxes between wages and wealth has long divided opinion. Supporters of taxing rental income more heavily argue it creates a fairer system where those with assets contribute proportionally. Critics say it unfairly penalises small landlords and risks deepening housing shortages.
The challenge of balancing taxation between income and wealth is complex. Our resource on capital gains and income tax deductions dives into government rules shaping tax fairness
Ultimately, the debate reflects a broader challenge: how to fund public services without undermining confidence in the tax system or worsening existing economic problems. Whether Labour presses ahead with its National Insurance proposal may depend as much on political strategy as fiscal necessity.
Final Summary
Labour considers NI on rental income called ‘unearned’.
Labour’s reported plan to impose National Insurance on rental income has reignited the debate over what counts as “earned” versus “unearned” income. Rooted in 19th-century economics, the framing reflects a long-standing view in parts of the Labour movement that property wealth should be taxed more heavily than wages.
For landlords, particularly the small-scale majority, this feels like an unfair caricature that overlooks the practical work involved in renting homes. Industry groups warn that new taxes could reduce rental supply and push up rents. Detailed official rental income statistics from HMRC highlight the scale and distribution of landlord earnings across the UK. See the latest figures at HMRC Property Rental Income Statistics 2025
The controversy highlights the political balancing act for Labour: protecting “working people” while ensuring fairness in the tax system. The outcome could reshape the relationship between landlords, tenants, and the Treasury for years to come.
