Buy to let landlords who improve the energy efficiency of their rental stock should get tax relief

The Government should allow income tax and/or corporate tax relief for buy to let landlords who improve the energy efficiency of their rental stock.

Head of Property at accountancy firm Blick Rothenberg, Heather Powell, said: “The Government could use the Budget in a month’s time to make this announcement.”

She added: “Whilst the Government has been encouraging buy-to-let landlords to improve the energy efficiency of their properties, it’s about turn on the imposition of higher standards from April 2025 and has stopped all requirements for landlords to undertake these works, which are essential if the UK is going to reach Carbon Zero by 2050.

“If the Government is serious about improving the efficiency of rental homes (and helping people deal with the cost-of-living crisis), it should allow buy-to-let landlords to get income tax relief when making their annual tax return declarations (or corporate tax relief, if the properties are owned through a limited company).”

Heather said: “This step would ensure that the landlords get tax relief on a timely basis and would help landlords fund the investment in improving Britain’s stock of rented accommodation.

“If the Government doesn’t take this step, the reality is that landlords will not look at improving the EPC ratings of their rental stock, as there is no legal requirement, and no financial incentive as they won’t get ‘tax relief’ for these capital improvements unless (and) until they eventually sell the properties concerned, at which stage they can offset the capital improvements against the capital gain. However, if they aren’t planning to sell a property, this is clearly a ‘null relief’.”

Heather added: “So how could the process work in practice? To ensure that any tax relief provided in this regard is ‘robust’ from a systems and value-for-money perspective, the Government could ensure that landlords have to meet all the following requirements:

• They obtain an initial EPC rating showing the energy efficiency status of the property ‘today’ with a list of recommended improvements.
• They undertake the work required (and have receipts etc. in this regard); and
• Then get an updated EPC rating showing the impact of the relevant improvements.

Relief should only be provided once all the above steps have been satisfied.”

“So, what about private homeowners? The Government could – if it wished – easily expand this proposal to ensure that private homeowners could go through the same process and claim a grant.”