The Landlord Energy Saving Allowance (LESA) permits landlords to deduct up to £1,500 from taxable profit for approved energy saving expenditure on each rental property. But if you are looking to take advantage of this allowance, you'd better hurry up because it ceases to exist in April 2015. Here's how it works.
Generally we avoid offering any advice on tax matters but Budget time always acts as a reminder that we all need to watch events and when this is combined with the tax year end and an imminent General Election, it really serves to concentrate the mind on this crucial area.
I am not going to bore you with the minutiae of the Budget – there are more than enough commentators far more qualified than I to churn out endless pages of analysis on this. Instead I want to bring your attention to an opportunity to save tax that is about to run out unless you act in the next fortnight.
The Landlord Energy Saving Allowance will cease to exist on 6th April 2015 for private individuals, (1st April for companies). This allowance permits you to deduct up to £1,500 from taxable profit for approved energy saving expenditure on each dwelling that you own and rent out. You can claim LESA for the costs of buying and installing the following energy-saving products for properties you rent out:
- Cavity wall and loft insulation
- Solid wall insulation
- Hot water system insulation
- Floor insulation
You do not necessarily have to have spent the money before the deadline – just sign a contract for the work to be done. Also, if you have carried out this type of improvement in the past four tax years (i.e. since April 2010) but did not make a claim in prior year tax returns, you have the same deadline for submitting a retrospective claim to HMRC.
If there is any likelihood that you could make a claim then I strongly advise you to act now and if necessary, take advice from a tax adviser – after all, if you have undertaken work on 10 dwellings this could be worth £6,000 in tax savings to you (10 x £1,500 @ 40% tax rate). N.B. if you rent out a building that contains four flats, you can claim up to £1,500 for each flat.
Bear in mind that with the Easter holiday coming up the effective deadline is not 5th April – but Thursday 2nd April!
Further information can be found on the Government website.