There has been a tremendous amount of discussion around EPCs, energy efficiency and legislative changes over the past few months and it is important that these issues remain firmly on the radar of all homeowners, especially those with larger properties. old ones in their wallets.
In the recent spring statement, we saw the Chancellor offer support to property owners by announcing that they would pay zero per cent VAT on materials to improve the energy efficiency of their properties, in exchange for a five percent VAT relief. percent. This is a positive measure that will help landlords reduce expenses during any vacancy and help tenants mitigate the rising cost of living. However, there has been a lot of ambiguity regarding environmental programs in the past and it is important that landowners know exactly how and where they can benefit from these incentives.
Energy efficiency is a particularly tricky balancing act for homeowners, as the cost implications are obvious. Research from Shawbrook recently found that landlords could lose up to £9,500 a year in rental income if they are unable to make sufficient improvements to their property before proposed changes to the EPC regulations and the 2025 deadline.
A white paper titled Take up the EPC challenge published by the lender showed that 30% of owners have yet to make energy efficiency updates to their properties, with most saying work will begin within the next 14 months. A total of 10% of owners said they would not start any work for three or four years, bringing them closer to the proposed 2025 deadline.
And 42% admitted their tenants would have to vacate properties while improvements are being carried out, with 38% expecting their properties to be vacant for four weeks at a cost of £5,000 in rental income.
Meanwhile, 23% of landlords said their properties are currently rated D or lower and therefore could not start a new rental from 2025 unless improvements are made, if proposed regulations are put in place implemented. The research also found that on average owners expect upgrades to cost £5,900, but only 31% currently have the funds to pay for the proposed changes.
There are a few worrying elements in this data that need to be addressed as soon as possible. So what can owners do to help cover these costs?
The obvious first step is to seek good professional advice when refinancing a buy-to-let (BTL_ properties or portfolio diversification). This also includes the ability to explore and find a range of alternative financing options to help renovate individual properties above Band C. .
Taking full advantage of all available tax breaks can also help homeowners prepare for upcoming CPE changes. Despite a reduction in the amount of relief homeowners can claim on the interest they pay on their mortgages, a Ludlowthompson report recently suggested UK BTL owners are claiming more tax relief in 2021 than last year. previous – £18.5 billion from £18.1. billion in 2020.
In addition, the report highlighted the need to ensure that energy efficiency improvements are not considered capital improvements, which would not qualify for tax relief. However, improvements such as the installation of double glazing and updated boilers would qualify under repairs, maintenance and renewals.
These are just a few of the options available to homeowners. But one thing is a must and that is not to ignore these green implications, as postponing work could prove financially detrimental in the longer term.
Cat Armstrong is Mortgage Club Director at Dynamo for Intermediaries