The Landlord’s Energy Saving Allowance (LESA) seems to have been swept under the carpet for a while now, so we did a bit of digging to find out if there are any plans to reintroduce some kind of support for landlords wanting to save on energy costs.
To recap, the allowance was introduced in 2004 and ran until 2015, encouraging landlords to install specific types of insulation with up to £1,500 per property available to claim against tax each year.
Currently under review, the commercial property market is hoping to hear from the Government’s consultation board on their decision to reward landlords with an EPC (Energy Performance Certificate) rating of C or higher, and what shape that reward would take.
The NRLA (National Residential Landlords Association), has taken up the fight, with a proposal issued to the UK Government:
“We are calling for the UK Government to reintroduce a tax allowance for landlords who are undertaking energy efficiency works. The qualifying works should be widened, to cover major upgrades such as the installation of external wall insulation (EWI) and heat pumps.
These measures are increasingly necessary to enable properties to meet higher energy efficiency levels – and are significantly more costly, with the cost of installing heat pump estimated at upwards of £7,000, and for EWI around £10,000 for the average three-bed semi.
Not all landlords will need to undertake these works to meet an EPC C, and the UK Government estimates that the average spend for a landlord to meet an EPC C under the proposed £10,000 cost cap is £4,700. But some will – particularly if they have older properties, which are harder to treat.
The introduction of a new tax allowance would support those landlords who need to undertake substantial works to meet regulations, as well as incentivising other landlords to take action earlier to move beyond the minimum standards.
That’s why we are proposing a new tax allowance, of £4,500 per property, enabling landlords to undertake significant works tax-free. This allowance – together with the other measures we have proposed – will reduce the ultimate cost to landlords as they will not need to pay income or corporation tax on their expenditure.
We know that a significant proportion of landlords are considering exiting the sector due to their concerns about meeting the new MEES regulations. Enabling more to remain and upgrade their properties helps keep tenants in their homes whilst also ensuring those homes will be ready for our net-zero future.” Meera Chindooroy, NRLA
With uncertainty around the law on achieving EPC C ratings by 2025, we support the NRLA in their fight for clarity. You too can follow the news from the NRLA here: NRLA Industry News.