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Should SDLT Go “Green”? – Property Taxes



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With rising energy costs and challenging net zero targets, could
Stamp Duty Land Tax (SDLT) be a useful tool to help Britain take
the next steps towards more energy efficient homes?

We believe that SDLT, as well as Welsh Land Transaction Tax and
Scottish Land and Buildings Tax, could be used to assist taxpayers
to achieve a greener, more energy efficient future.

Between 2007 and 2012, full relief from SDLT was available on
the purchase (for £500,000 or less) of newly constructed
properties which met specified standards of energy efficiency,
whilst purchasers buying dwellings for more than £500,000
obtained a £15,000 relief from their SDLT liability. To
obtain this relief, the seller had to provide a certificate that
had been issued by an assessor to demonstrate that the home
qualified.

A decade later and SDLT has only increased in complexity and
cost, with added surcharges around second home ownership and
non-resident purchasers, as well as reliefs targeted at first time
buyers and others. Indeed, nowadays the tax on residential
properties can be as high as 17%.

Although adding a further relief to an already complicated set
of rules may seem counterproductive (especially for busy
conveyancers who are not supported by a wealth of tax lawyers),
successive governments have been willing to use SDLT to nudge
behaviour in certain directions and the changes made have had
significant impact on purchasers’ actions. For evidence of
this, we only have to cast our minds back a couple of years when
SDLT reliefs put in place during the COVID-19 pandemic resulted in
an overall increase in transactions, with properties in the price
bands that benefitted the most from the increase in the nil rate
threshold (such as properties above £500,000) receiving a
significant proportion of the upturn. It is not difficult to
envisage purchasers turning their focus to a property’s energy
efficiency if there is a significant tax saving (for example, on
their SDLT bill) to be made.

With ambitious targets for Britain’s reduction in carbon
emissions, the Government could look to the reinstatement and
beefing up of this “green” SDLT relief. One option would
be to tie the level of relief to the Energy Performance Certificate
(EPC) ratings which are required to be produced before a property
can be marketed for sale, with more energy efficient properties
benefitting from a greater relief. Expanding such a relief to all
dwellings (not just new builds), would incentivise property owners
to invest in improving their property’s energy efficiency;
sellers would then be able to market their low carbon properties as
more affordable or share in the SDLT savings with the
purchaser.

We are not alone in thinking that this could be an effective way
forward. The UKGBC made a similar suggestion in their 2021 report with a plan to make the change
revenue neutral by also adding SDLT increases to homes with low
energy efficiency.

Coupled with other targeted assistance the Government provides
for improving energy efficiency, this could be an effective way of
encouraging homeowners to take the often-expensive steps to improve
the energy efficiency of their homes; surely an appealing prospect
on both an environmental and cost of living level?

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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