Landlord’s Energy Saving Allowance (LESA) is a tax allowance of up to £1,500 per property that private landlords can claim when they install energy efficiency measures in their rented properties.
So for a portfolio of 10 properties that’s £15,000 tax savings. Being Green and energy efficient is important, this added financial incentive is easy to take advantage of, but it won’t be around for ever. Further at present in the economic climate it easy cheaper and easier to get improvements done, and do not forget winter is coming.
In 2004 the Government introduced a tax allowance called the Landlord’s Energy Saving Allowance (LESA), allowing private landlords to claim back money when they improve the energy efficiency of their rented properties. This is a very simple process with expenditure offset against tax through your annual Tax Return form, up to a maximum of £1,500 per property.
It is important for you to act now, as Energy Performance Certificates have become compulsory for all new tenancies in 2009. These certificates rate the relative energy efficiency of your property and all prospective tenants will have to see this prior to signing any tenancy agreement.
The most recent Scottish House Condition Survey showed private rented housing to be the least energy efficient of all UK housing sectors. Many landlords may be reluctant to invest in energy efficiency, as they see no return for themselves and imagine all the benefits go to the tenants. In fact there are many benefits for landlords, and the LESA is just one of these.
What is covered by the LESA
When the LESA was introduced with the 2004 Budget it only covered loft and cavity wall insulation. Its remit has been extended every year, and currently covers the installation of the following energy efficiency measures:
INSTALLATION DATE INTRODUCED
Loft Insulation 2004
Cavity Wall Insulation 2004
Solid Wall Insulation 2005
Draught Proofing 2006
Hot Water System Insulation 2006
Floor Insulation 2007
Who is eligible for the LESA
All individual landlords who let residential properties and declare the income through Income Tax are eligible to claim this allowance when they install the above measures in their rented homes. The 2007 Budget has extended this so it now also includes corporate landlords who let residential properties and declare the income through Corporation Tax.
How to claim the LESA
One of the best aspects of the LESA is its simplicity. Landlords do not want hassle; they want a simple process which will not take up valuable time.
When you pay to have any of the above energy efficiency measures installed in your rented homes, you simply complete box 5.36C on your Tax Return form and this amount will be offset against your tax, up to a maximum of £1,500 per property. This means you can effectively improve the energy efficiency of your property at considerably reduced cost, saving either 22% or 40% depending on your tax bracket.
(Cost of insulation = £1,500)
Annual taxable income £20,000
– LESA (cost of insulation) – £1,500
Total taxable profit £18,500
Saving at 22% tax £330 *
Saving at 40% tax £600 *
* Remember, this is only for one property. If the same work is carried out in each property, the tax saving is multiplied by the number of properties.
However, it is important to remember that this financial incentive is not the only benefit for landlords.
10 ways LESA will benefit landlords
With climate change high on the Government agenda, there is a drive to lead a more sustainable way of life. Housing is responsible for over a quarter of all UK CO2 emissions, and a large part of this comes from heat loss. Private landlords are in a strong position to help improve this situation, and the LESA allows you to do so and save money at the same time. Below are just some of the benefits of renting energy efficient properties:
1. 2You can insulate your properties and improve your EPC rating, while saving money
2. 3The value and desirability of your property should be protected or enhanced
3. 4You will receive a tax rebate on your energy efficiency spending
4. 5Your tenancies should become longer and more secure
5. 6Your void periods, complaints and repairs should decrease
6. 7Your tenants will enjoy warmer, more comfortable lives in your property
7. 8You will help meet the Government’s targets for reduced carbon emissions
8. 9Your reputation as a landlord should be improved
9. 1You will be eligible to become a partner to Edinburgh’s Affordable Warmth Strategy
10. You can call yourself a Green Landlord
The LESA does not cover holiday lets or resident landlords, and it may not be possible to install some energy efficiency measures, e.g. insulation in a single flat in the middle of a block.
Information sourced from www.changeworks.org.uk and contact your local authority for other incentives in the areas of your properties.
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