The green tax and what it could mean for landlords

The green tax and what it could mean for landlords

Landlords up and down the country have been left reeling by revelations they could be facing a so called green tax on their properties. Government measures to improve energy efficiency could result in landlords facing a bill of up to £5000 for every property in their portfolio.

From April 2018 all homes must have an energy efficiency rating of at least Band E. For those properties currently sitting in Bands F & G, and figures suggest this includes over 300,000 buy to let homes, the costs to upgrade could run up to £5000.

No more Green Deal

Previously these costs could be met by loans from the Green Deal scheme. However, the government, in the form of the new Department for Business, Energy and Industrial Strategy, is now proposing the costs of improving energy efficiency be met by landlords.

This has brought an angry response from the Residential Landlords Association (RLA). Policy advisor, Richard Jones, said: “Unless they make funding available, landlords will be forced to pass these costs on to tenants in the form of higher rents. It could also make being a buy-to-let landlord prohibitive. They could struggle to find such a large amount of money upfront.

"Landlords have been harshly treated. This is an extra stealth tax on top of all the other measures that threaten the finances of the sector."

The government meanwhile are insisting that most landlords will only have to stump up around £1800 and may introduce a spending cap of £5000 to 'protect' landlords. Again the RLA dispute those figures pointing out that gas central heating on its own can cost around £4000 before the additional costs of wall and loft insulation.

Government proposals

The Department for Business, Energy and Industrial Strategy have dismissed fears that their proposals could see rents rise. They believe any impact on landlords will be slight as few properties are affected.

The green tax proposals were conveyed in a briefing to landlords in which the department stated: “Data suggests around 60 per cent of privately rented properties are currently owned outright. So we assume that these landlords will have a significant amount of equity against which they might borrow.”

A stance which is hardly likely to go down well with landlords.

Another blow to the finances

The green tax is the latest body blow to landlords already reeling from the 3% surcharge on stamp duty, along with the upcoming reduction in tax relief on mortgage payments.

At the moment it should be stressed that the green tax is just a proposal. Unfortunately, it seems the plans drawn up by the Department for Business, Energy and Industrial Strategy will become enshrined in law by April 2018.

Watch this space.