If you are a landlord and make energy saving improvements to your property, you could reduce the tax you pay. You can do this by claiming the ‘Landlord’s Energy Saving Allowance’ (LESA). The following will detail the eligibility requirements, what the allowance covers and how to apply for it.
This tax allowance allows private landlords to claim back money when they improve the energy efficiency of their rented properties. As a landlord, you can claim LESA if you are renting out residential property and are either:
- an individual landlord – someone who pays income tax on profits from letting
- a corporate landlord – someone whose rental business is registered as a company and you pay corporation tax on profits from letting
However, you cannot claim if you are a landlord:
- claiming an allowance under the ‘Rent a Room’ scheme
- of a property rented out as furnished holiday accommodation
LESA is a tax allowance (not a cash payment) that allows you to claim up to £1,500 against tax every year. This allowance can be claimed for properties you rent out in the UK and abroad. You can claim LESA for the costs of buying and installing certain energy saving products for properties you rent out, but only for what you actually spend. You can claim LESA up to 1 April 2015, when the availability of this allowance will end.
You can claim LESA for what you have spent on:
- cavity wall insulation
- loft insulation
- solid wall insulation
- draught proofing
- hot water system insulation
- floor insulation
One of the best aspects of the LESA is its simplicity. 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.
Landlord’s Energy Saving Allowance
Example: (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.
