The government has withdrawn the Landlord’s Energy Saving Allowance from April 1st 2015.
Through the scheme, landlords could reduce their annual tax bill by up to by up to £1,500. And the money saved through a range of energy-saving options could be reinvested in quick-return options, not directly covered by the scheme, such as LED lighting and water-saving products like eco showers, eco taps and tap aerators.
That way, landlords could save literally hundred of pounds a year in addition to the LESA.
How the scheme works
Landlords can claim LESA for the costs involved in makings energy-saving improvements to properties that are rented out, covering purchase and installation.
You can claim for:
- Draught proofing
- Cavity wall and loft insulation
- Hot water system insulation
- Solid wall insulation
- Floor insulation
Landlords are allowed to claim a maximum allowance of £1,500 for each house, flat or bedsit being rented out. The claims can extend to properties being rented out overseas, but UK tax needs to paid on profits from the properties.
In cases of joint ownership LESA is flexible and owners can claim their share in two ways. It can be based on the amount of the property owned – for example 50/50 ownership means landlords can each claim half the total allowance or £750.
The other option is to claim depending on the total amount spent on the energy-saving improvements. For example, three people co-owning, each would be able to claim up to a third of the total allowed – in this case £500.
There seems little point in cutting costs by installing the energy-saving measures yourself. LESA will only cover purchase costs in these instances.
Also landlords are not allowed to claim LESA if they already claim under the ‘Rent a Room’ scheme and/or if the property is being rented as furnished holiday accommodation.
Landlords can claim LESA when filling in the annual tax return, either under Self Assessment, if renting out as an individual or under “allowable business expenses” on the Company Tax Return form.
As always, it’s worth seeking advice from HMRC or your tax advisor.