Property investors wanting to green up their properties with energy saving improvements are running out of time to claim the valuable Landlord Energy Saving Allowance (LESA).
Unless Chancellor George Osborne renews the allowance in his Budget 2015 in March, landlords will lose the tax break.
LESA offers property owning companies and landlords the chance to offset switch energy saving improvements against rental profits instead of including them as capital spending.
Claims can be made for spending on energy saving products such as:
- Cavity wall and loft insulation
- Solid wall insulation
- Hot water system insulation
- Floor insulation
If the allowance is dropped, claims are still allowed but as improvements against capital gains tax (CGT).
The result is property investors pay less income tax in the year when the improvements are carried out with LESA rather than offsetting them against CGT when disposing of the home.
Owners can claim £1,500 LESA for each rental property they own in each tax year – so investors with multi-unit blocks can claim the £1,500 allowance for each flat.
Joint owners can either claim the allowance in line with the share of the property they own – so a 50% share is a maximum £750 claim, or they can claim for what they personally spent on improvements up to the £1,500 limit.
For example, if one joint owner paid £1,200 and the other £300, they can claim for their personal share of the costs.
Property owners who self- install energy saving products can only claim for the purchase price and not their labour.
LESA claims are not allowed for:
- Uncommercial lets – homes rented to family or friends for no rent or below market value rents
- Householders with a lodger under the Rent-A-Room scheme
- Holiday lets
Overseas properties are eligible for LESA, providing the owner pays income tax on any rental profits in the UK.
The allowance is claimed through a self-assessment tax return for individuals or a company tax return for corporate property owners.
Landlords Set to Lose Energy Saving Tax Boost – http://t.co/uGcvlPkFnM
— LandlordZONE (@LandlordZONE) February 27, 2015