Rachel Reeves is considering a tax increase for UK landlords in this year’s Autumn budget as she attempts to fill a £40bn hole in the public finances.

The Chancellor is examining proposals for applying national insurance (NI) to rental income in the hope of raising £2bn.

Officials are drawing up options for tax rises in an attempt to avoid breaking the “red lines” set by Reeves before the general election, where she promised to not raise taxes for ‘working people’, according to The Times.

This has put her in a tight spot, with no room to increase VAT, income tax or national insurance.Employee’s National Insurance is charged in bands, but typically employers deduct eight per cent from employees’ monthly pay between £242.01 to £967, and two per cent for earnings over £967.

Earnings from property, pensions and savings are currently largely exempt from NI contributions.

The expanded levy would not break Reeves’ red lines as it would not involve a rate raise, allies of the Chancellor told The Times.

Pressure on landlords ramps up

Net property income totalled £27bn from 2.2m people in 2022-23, according to official figures. An extra levy of 8 per cent would have generated £2.18bn.