Charging National Insurance on rental profits and introducing rent caps would help tenants while protecting heavily mortgaged landlords, according to the Joseph Rowntree Foundation (JRF).

The organisation suggests introducing a rent control to cap increases in-tenancy at CPI and between tenancy increases at CPI+2% which could save renters almost £1,200 per year within six years. It says applying National Insurance Contributions (NICs) to rental income while restoring full mortgage interest relief would protect landlords most impacted by these controls and higher mortgage rates, without jeopardising the PRS.

Analysis by JRF and the Autonomy Institute shows that most English landlords recorded higher returns compared to similar benchmark investments, even after tax (74% in 2018, 99% in 2021 and 63% in 2024).

Loss

It explains that the tax system exacerbates the risk of mortgaged landlords making a loss, due to Section 24 restricting tax relief on mortgage interest. Landlords who own outright without a mortgage, making the highest returns, are taxed lightly on their profits in comparison.  

Introducing its proposed tax changes would lead to fewer landlords making a loss by 2030, even with rent controls, than if the current tax system remained - improving the stability of the sector and better protecting the supply of rental homes, according to the resarch. This would protect highly leveraged landlords from some of the impact of higher mortgage rates.

Fund

The research also shows how savings generated could fund the annual uprating of Local Housing Allowance back to the 30th percentile of local rents, while also delivering more than £600 million in net savings to the Housing Benefit bill by 2030.

Rosie Worsdale, senior policy adviser at JRF, says: “Targeted tax reforms would capture the extraordinary profits landlords have experienced and tax all income from rents more fairly, while also protecting the most exposed landlords. Together this would create the conditions where rents could be capped, easing the squeeze on renters, without detrimental consequences.”

Property lawyer David Smith, at Spector Constant & Williams, confirms that the Landlord and Tenant Act 1985 permits the Secretary of State to make regulations “restricting or preventing increases of rent for dwellings which would otherwise take place” or “restricting the amount of rent which would otherwise be payable on new lettings of dwellings”.

He adds: “It could, for example, be used to restrict rent increases through a s13 notice to a fixed percentage or to RPI. It could also impose a freeze or limit on new tenancy rents.”

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