Rachel Reeves is considering a major new tax raid on landlords' "unearned" income in a bid to raise as much as £2billion.
Treasury officials are said to be looking into how to levy National Insurance on rental income with just weeks remaining until the Chancellor's second autumn Budget.
At present, NI does not have to be paid on most earnings from pensions, property, and savings.
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Allies of Rachel Reeves have argued slapping property owners with a fresh tax would not break her 'red lines'
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With the Chancellor straining to stay on one side of her "red lines" on "taxing working people" - VAT, income tax or National Insurance - landlords have been specifically targeted for their "unearned revenue".
Sources with knowledge of pre-budget preparations told The Times that NI could be expanded to include rental income.
And Treasury Minister James Murray claimed to GB News before Labour's first Budget last year that "the definition of working people is a wide one".
It means "people who go out to work and that's how they earn their income," he said.
"I think what we're very clear on is that we want to protect working people by not increasing the rates of income tax, National Insurance and VAT," Mr Murray added.
But allies of Ms Reeves have now argued slapping property owners with a fresh tax would not break the "red lines".
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They claimed that doing so would only widen the earnings to which NI applies, rather than raising an existing tax rate.
They also compared it to putting VAT on private school fees. At least 54 private schools have folded since January 1, when the VAT exemption came to an end.
If the landlord tax comes to pass, some 360,000 Britons could be hit by bills of over £1,000.
The latest official figures - though from 2023 - show a total £27billion of net property income in the UK.
A levy of eight per cent would have generated £2.18billion for the Treasury.
However, the threshold for existing employee contributions drops to two per cent after a £50,000 earnings threshold.
If this were retained, it would mean smaller landlords would be hit harder.
The most common property income bracket was £50,000 to £70,000, which earned landlords £4.76billion - and 360,000 of them could be hit by an extra £1,057 bill every year if forced to pay the levy.
Torsten Bell, who once led the think tank behind the proposal, is in charge of preparations for this year's Budget
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The Resolution Foundation think tank proposed the idea last September before the 2024 Budget.
Torsten Bell, who once led the RF, is in charge of preparations for this year's offering.
Hiking NI on landlords is now said to feature in the options under consideration - thanks to Britain's even larger "black hole" in the public finances.
A Treasury spokesman said: "As set out in the plan for change, the best way to strengthen public finances is by growing the economy, which is our focus.
"Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8billion and cut borrowing by £3.4billion.
"We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee National Insurance, or VAT."
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