Call for investors who improve EPCs to get tax relief

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

That’s the view of Heather Powell, partner and head of property at tax and advisory firm Blick Rothenberg.

“The government could use the Budget [on March 6] to make this announcement. 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” she says.

“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.”

She says 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, Powell reckons 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 landlords aren’t planning to sell a property, this is clearly a ‘null relief’. So how could the process work in practice?

She says that 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.

Powell says that relief should only be provided once all the above steps have been satisfied