The New Economics Foundation (NEF) is urging Labor to bring landlords’ rental income within the scope of National Insurance Contributions (NICs).
The think tank said the measure could raise billions of pounds for the Treasury, while addressing what it describes as preferential tax treatment for property investors.
The NEF has proposed the reform as part of a broader package of tax changes that it says could make the system fairer and generate additional government revenue.
In a recent report, the organization estimated that applying National Insurance to rental income could generate as much as £3.2 billion annually.
Under the current system, landlords pay income tax on profits from rental properties, but are generally exempt from national insurance contributions because rental income is classified as investment income, not income.
Although landlords can choose to set up voluntary NICs to protect their entitlement to the state pension, there is no obligation for them to contribute in the same way as employees or the self-employed.
The NEF states that this distinction creates an unfair advantage for landlords compared to employees whose income is subject to national insurance.
George Bangham, head of social policy at the NEF, said: “If landlords make money from rental income, they are not being asked to make the same contribution as everyone else.
“This is clearly unfair: income from renting out a property should be treated in the same way as income from work.”
The NEF described the current exemption as an “unjustified tax advantage” and said extending national insurance to rental income would help create greater consistency between different forms of income.
To soften the impact on landlords, the think tank suggested any changes could involve the reintroduction of mortgage interest deductions. abolished by former chancellor George Osborne.