{"id":85450,"date":"2025-08-29T07:12:19","date_gmt":"2025-08-29T06:12:19","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=85450"},"modified":"2025-08-29T07:12:19","modified_gmt":"2025-08-29T06:12:19","slug":"is-rachel-reeves-going-to-extend-national-insurance-to-investment-income","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2025\/08\/29\/is-rachel-reeves-going-to-extend-national-insurance-to-investment-income\/","title":{"rendered":"Is Rachel Reeves going to extend national insurance to investment income?"},"content":{"rendered":"

I received a pile of emails from estate agents and financial advisers \u2014 otherwise known as people living in fear of losing their sinecures \u2014 during the course of yesterday about the possibility that the government might impose National Insurance charges on the income of people who receive rents in the UK. This rumour is going the rounds today and has now reached The Guardian<\/a>, which has said:<\/p>\n

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The Treasury is reportedly considering a tax on landlords that will target income from rents in the autumn budget.<\/p>\n<\/blockquote>\n

They added:<\/p>\n

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The proposals are centred on the expansion of national insurance to include rental income, which is currently exempt from the levy, as part of a broader push to plug a potential \u00a340bn shortfall in the public finances.<\/p>\n

Labour insiders\u00a0told the Times<\/a> that property income was \u201ca significant potential extra source of funds\u201d and landlords were seen as a way of targeting \u201cunearned revenue\u201d.<\/p>\n

Currently, earnings from property, savings and pensions are largely exempt from national insurance. However, widening national insurance, which usually applied employee earnings at a rate of 8%, to include rental income could reportedly end up raising about \u00a32bn.<\/p>\n<\/blockquote>\n

I am, of course, pleased to note that the government is using some common sense on this issue. I recommended a charge equivalent to National Insurance on all forms of investment income in the Taxing Wealth Report<\/a>.<\/p>\n

I suggested that this charge should apply to interest, dividends, rent, receipts from trusts, capital gains, and other unearned sources of increase in a person's financial well-being over the course of a year. There is no ethical justification whatsoever for people who are at work being required to both pay National Insurance themselves and also suffer reduced wages as a consequence of their employers having to do so, which is, in fact, what happens as a consequence of the employer\u2019s National Insurance charge. I suggested, as a result, that the income tax rate on combined income from all these sources above a low limit of, maybe, \u00a35,000 a year should be subject to a 15% income tax surcharge, which is still generous when compared to the comined 23% national insurance charge on most people's wages.<\/p>\n

There is, of course, nothing new about this: a charge of this sort was introduced in the 1960s by a Labour government, and was not abolished until the mid-1980s by Margaret Thatcher. It would, then, be straightforward to reintroduce this charge.<\/p>\n

Importantly, almost no changes to tax returns would be required, although, of course, the computation of tax liabilities would change a bit as a result.<\/p>\n

I estimated that this would be one of the most effective changes that any Chancellor could make with regard to the taxation of income and gains derived from wealth, believing it might raise up to \u00a318 billion a year in additional revenue for the government<\/a>.<\/p>\n

The rumour going around today suggests that what Rachel Reeves is considering would raise \u00a32 billion, so it looks as if she might massively underutilises the potential in such a charge when if applied as I suggest, she could use it to provide her with the excuses she needs to:<\/p>\n