Landlord Energy Efficiency Costs: Can You Claim Them?

The EPC Challenge

All rental properties must have a minimum Energy Performance Certificate (EPC) rating of E. The government has proposed raising this to C in the future. Meeting these standards often requires investment in energy efficiency measures.

The tax treatment of this spending depends on whether the work counts as a repair or an improvement.

What Is Deductible?

Repairs (Deductible Against Rental Income)

• Draught-proofing existing windows and doors
• Repairing or replacing existing insulation to the same standard
• Fixing broken heating controls
• Repairing existing boiler to maintain efficiency
• Replacing a like-for-like boiler

Improvements (Capital Expenditure — Not Deductible Against Rental Income)

• Installing insulation where there was none before (loft, cavity wall, underfloor)
• Replacing single glazing with double glazing
• Installing a new heating system
• Adding solar panels
• Installing a heat pump

Capital improvements reduce your CGT liability when you sell, but provide no immediate income tax benefit.

The Grey Area

Replacing an old boiler with a modern condensing boiler is generally accepted as a repair (nearest modern equivalent), even though the new boiler is more efficient. Similarly, replacing old radiators with modern ones of a similar type is a repair.

However, installing underfloor heating where there were previously radiators would likely be an improvement.

Government Incentives

Check whether any government grants or incentives are available for energy efficiency improvements. These can offset the upfront cost, and any grant received would not be taxable income for the landlord.

Planning Ahead

If EPC C becomes mandatory, landlords with lower-rated properties will need to invest. Understanding the tax treatment now helps you plan:

• Budget for the upfront cost (capital improvements do not reduce your income tax bill)
• Keep all invoices for CGT purposes
• Consider the timing of improvements relative to potential property sales

Track all property expenditure with Accounted — Penny categorises costs correctly as repairs or improvements.

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Energy efficiency spending is rising. Know the tax rules. Sign up for Accounted and let Penny help you track every property cost correctly.