How green landlords can save on tax

May 15, 2008

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From 1 October 2008, all rental properties with a new tenancy in England and Wales will be required to have an Energy Performance Certificate, and since energy costs are soaring, prospective tenants may very well opt for a property that’s cheaper to run.

To stay ahead of the game, landlords should take advantage of the Landlord’s Energy Saving Allowance (LESA), a tax break designed to encourage landlords to increase the energy efficiency of their property. A maximum of £1,500 per property can be claimed against the cost of installing draught proofing and insulation for lofts, floors, cavity and solid walls or for hot water systems. Not only will this reduce your tenants’ bills, it can also alleviate damp and prevent the need for maintenance due to damp and condensation.  

Assuming your annual taxable income is £20,000 and you spend £1,500 on insulation measures, you can reduce your taxable income to £18,500. This represents a £300 saving for lower-rate taxpayers and a £600 saving for higher-rate taxpayers. To claim, do the work and then complete box 5.36C on your tax return at the end of the year.

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