This article examines potential Budget changes and their impact on landlords’ incentives to improve rental properties.
- Landlords currently receive tax relief only for repairs and not for property upgrades, potentially discouraging improvements.
- Changes in tax relief could help landlords meet future EPC rating requirements, benefiting tenants and the environment.
- 21% of privately rented homes currently fail to meet decent standards, highlighting the need for improvements.
- A proposed tax change may offer a ‘carrot’ to landlords, improving rental stock and aiding the UK’s Carbon Zero goal.
Potential changes to the Budget, as suggested by Coventry Building Society, aim to bolster incentives for landlords to upgrade their rental properties. At present, landlords can only claim tax relief on repairs and like-for-like replacements, but not for upgrades. This limitation arguably discourages landlords from making necessary improvements that could enhance living conditions for tenants.
By offering tax relief for property upgrades, landlords might be more inclined to improve their properties to meet future Energy Performance Certificate (EPC) requirements. By 2030, all rental properties in the UK will need to achieve an EPC rating of Band C or above. Such changes could serve as a significant motivation for landlords.
The current state of the private rental sector underlines the urgency of these changes. Data from the latest English Housing Survey indicates that 21% of privately rented homes do not meet the decent living standard and require significant upgrades.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, has highlighted the tax burdens landlords face, such as the 3% Stamp Duty surcharge when purchasing rental properties and up to 24% Capital Gains tax upon selling. According to Stinton, “Minimising the amount of tax they pay in the middle” could provide much-needed relief amid a potentially challenging Budget.
Most landlords strive to maintain good relationships with their tenants by offering better living environments. However, the current tax framework does not facilitate property upgrades. This proposed tax adjustment could thus be transformative, not only enhancing tenants’ living standards but also advancing the broader objective of making the UK Carbon Zero by 2050.
Proposed tax changes offer landlords an incentive to improve property standards, advancing tenant welfare and environmental goals.
