Wednesday, 4 March 2015

Tax Perk for Buy-to-Let Landlords

For all of you who know about our FREE legal advice forum, LawStore Social, will be aware of a recent article relating to the new energy efficiency regulations coming into force for landlords in 2018. This change in both the law and regulations will see landlords being banned from renting out homes in England and Wales if the property falls below an E on the EPC rating.

Following on from the latest regulation news for landlords, buy-to-let landlords are now being warned that they should act now in order to claim a tax perk on home improvements. This £1,500 tax relief has been designed to help landlords meet the new ‘green’ targets. With only a few weeks left to apply for this tax relief, the government is urging landlords to use this money as a way of boosting their properties energy efficiency through insolation or a new boiler. This tax relief is only available until April 2015.

In addition to this, a further £5,600 is also available as a Green Deal cashback. However, landlords have been warned that the application process for this can be chaotic. In order to claim this, landlords should act now.

Commencing April 2018, it will be unlawful for a landlord to let a property which has an energy rating of E or higher. As a result, landlords will have 3 years in which to make changes to their properties before these energy efficiency rules come into action. Some have argued that the costs to do this could run into the tens of thousands, with both Edwardian and Victorian properties being the most effected. These types of properties are said to take up 10% of the current rental market.

The government has later gone on to argue that tenants pay up to £880 more per year for energy in properties whose energy rating falls below band E. From April 2018, it will be illegal for landlords to attempt to rent out inefficient properties. Failure to comply will result in landlords either being fined or prosecuted if the property is not ‘green’ enough.

However, it must be noted that exemptions apply to properties where work is deemed ‘too expensive’ or it is not possible to make the property more energy efficient. Moreover, from April 2016, rental reforms will make it illegal for landlords to ‘unreasonably refuse’ requests from tenants to make a home more efficient. In an attempt to help landlords, landlords can claim income tax relief using the Landlords Energy Saving Allowance which is due to expire however on the 6th April 2015. Many have argued that this tax relief should be ongoing and not have an expiry date.

Do I need to improve my property? 

All rented properties must have an Energy Performance Certificate (EPC) which stipulates how energy efficient the property is on a scale of A to G, with ‘A’ meaning very efficient and ‘G’ meaning inefficient.

The £1,500 being given to landlords in the form of a tax break can be deducted from the cost of the work required from your annual taxable income. This tax perk can be claimed via your self-assessment tax return.

The £5,600 from Green Deal Cash for home improvements is available on a first come first served basis through Green Deal, with the next release of funds expected in April. The remaining costs can then be financed through a Green Deal loan, repayable through the tenant’s energy bills. In order to qualify for this, landlords must first book a Green Deal assessment.

To find out more simply click here. 

Additional funding can also be sourced through Energy Companies Obligation (ECO) which funds £1.3bn energy improvements each year. ECO however is expected to run out on 31st March 2015.

If you are thinking of purchasing a buy-to-let property, LawStore Conveyancing can help you! Lawstore Conveyancing provides direct contact with knowledgeable Property Solicitors, who will work with you to guide you through all the legal processes necessary, ensuring that any potential problems are flagged up as early as possible. 

If you are a landlord or a tenant looking for further information and advice in regards to these changes, simply contact the LawStore on 0845 603 6544 to speak with one of expert advisors.

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