UK landlords can get additional tax perks before April.

Landlord Expert
By Landlord Expert February 26, 2015 21:55

Buy-to-let landlords are being warned to act now before a tax perk on home improvements that could help them meet new green targets is abolished.

There are just a few weeks to apply for £1,500 tax relief, per property, on works to boost energy efficiency such as insulation or a new boiler.

A further £5,600 of Green Deal cashback is available, but the application process can be chaotic, so landlords should apply as soon as possible if they want to claim.

Landlords have three years in which to make home improvements before new energy efficiency rules come into force. Their costs could run into tens of thousands of pounds and are most likely to affect Victorian and Edwardian properties, thought to make up 10pc of the rental market.

From April 2018, all rental properties must have an energy rating of Band E or higher, otherwise they will be unlawful to let.

The Government says tenants pay up to £880 more per year for energy if they live in a property whose rating is below Band E. When the new rules take effect it will be illegal to attempt to rent out inefficient properties, and landlords could be fined or even prosecuted if they are unaware that their home is not “green” enough.

However, the regulations exempt properties where works are deemed “too expensive” or if it is impossible to make the property more efficient.

The targets are among rental reforms that also make it illegal, from April 2016, for landlords to “unreasonably refuse” requests from their tenants to make a home more comfortable.

Currently, landlords can claim income tax relief using the Landlords Energy Saving Allowance, but the perk is due to expire on April 6 .

Commentators have criticised the expiry of the tax break just as landlords are being told to improve their homes. “We should not let this policy expire and die just when it could be really useful,” said David Weatherall of the Energy Saving Trust.

The British Property Federation, Energy Saving Trust, Citizens Advice and National Landlords Association (NLA) are all appealing for the Government to renew the tax relief.

There are also fears that Green Deal cash will be scrapped by a possible Labour government, meaning that landlords would be expected to pay for the improvements themselves. Currently landlords can effectively install their measures free of charge by using a Green Deal loan that is repaid through energy bills. The principle is that the bills will never be higher than before the works were carried out.

Do I need to improve – and how can I do it?

All rented homes must have an Energy Performance Certificate, which tells you how efficient a building is on a scale of A (very efficient) to G (inefficient).

To spell out the options, we have used the example of a G-rated Victorian property that requires double-glazed windows (£4,000), loft insulation (£300), a heat-proof door (£100) and cavity wall insulation (£5,000) to meet the new requirements. The total cost of the works is £9,400.

1. £1,500 from landlord tax breaks. You could deduct the cost of the works from your annual taxable income. Claim the perk via your self-assessment tax return.

2. £5,600 from Green Deal Cash for home improvements is available through the Green Deal on a first-come, first-served basis, with the next release of funds expected in April. The remaining costs could be financed through a Green Deal loan, repaid through your tenants’ energy bills.

To qualify, landlords must first book a Green Deal assessment. An official report from this details the works needed and can be used to apply for vouchers. We explain the process here.

You either pay for the works upfront and claim the cash later or pay once you receive the vouchers. This is decided with your installer.

3. More money from a grant. You might be eligible for funding elsewhere. The main source is the Energy Companies Obligation (ECO), which funds £1.3bn of energy improvements each year.

ECO runs out on March 31 and, although it is expected to continue, its funding will be drastically cut. The budget for the Carbon Emissions Reduction Obligation, for example, which includes funding for insulation and heating systems, will be reduced by a third.

Landlord Expert
By Landlord Expert February 26, 2015 21:55

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