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Last chance to save tax on energy saving upgrades
24 February 2015
Landlords wanting to spend some money updating buy to let homes to save money on energy have just a few weeks left to claim a £1,500 a house tax break.
HM Revenue & Customs (HMRC) is withdrawing the Landlord’s Energy Saving Allowance (LESA) on April 5 – unless Chancellor George Osborne extends the tax break in Budget 2015.
LESA covers the costs of buying and installing a range of energy saving products –
• Cavity wall and loft insulation
• Solid wall insulation
• Hot water system insulation
• Floor insulation
The allowance covers buy to lets and house in multiple occupation (HMO) properties in the UK and overseas, providing tax is paid on any rental profits in the UK on the properties.
Landlords can claim LESA up to £1,500 for each rental property – so property investors with blocks with several flats rented out can claim the allowance for each flat.
Joint owners have two options for claiming the tax break:
They can claim the allowance in line with the share of the property they own – such as a 50% share is a £750 claim or a 33% share is £500.
Or they can claim for the amount of money they paid for the improvements, so if one joint owner paid £1,000 and the other £500, they can claim for their share of the costs.
A point to watch is if a DIY landlord installed the product, only the buying cost is allowed as a LESA claim as the landlord cannot charge for their own time.
Claims are not allowed for:
• Uncommercial lets, which are homes rented out to family or friends for free or below market value rents are excluded.
• Householders letting to a lodger under the Rent-A-Room scheme
• Holiday lets
The allowance is claimed by completing the relevant boxes marked Landlord’s Energy Saving Allowance on the SA105 UK property pages of a self-assessment tax return for UK letting properties or the property section of the SA106 106 foreign pages for buy to lets overseas.
Properties owned by companies also qualify for the allowance.
The allowance is worth claiming as LESA switches capital improvements normally offset against capital gains tax on disposal of a property to repairs and maintenance deductible against rental profits in the tax year when the work was carried out.
If LESA is not renewed in Budget 2015, the spending can still be claimed, but as a capital cost on disposal of the property.