Stamp duty warning: Plans for reduced rates could leave some Britons ‘struggling to sell’

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Stamp Duty: Expert predicts ‘announcement’ in next budget

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The Energy Efficiency Infrastructure Group (EEIG), which is made up of industry businesses and charities, has proposed plans for an Energy Saving Stamp Duty Incentive to encourage homeowners to decarbonise their homes. The proposal suggested that people who buy eco-friendly homes with a higher EPC rating should benefit from paying less stamp duty. Properties in the UK are given an energy efficiency rating which is calculated at the point of sale.

The rating is between A and G, with A being the best (most energy efficient) and G being the worst.

New build homes tend to have better EPC ratings while older homes tend to have lower ratings.

Currently, the average EPC rating for a home in the UK is D.

Homeowners are being encouraged to get their properties to EPC band C by 2035.

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The EEIG has written to Chancellor Rishi Sunak calling for the Energy Saving Stamp Duty Incentive which they think will lead to more sustainable new homes and an increase in retro-fitted, owner-occupied homes.

The group has also highlighted that the incentive would encourage homeowners to buy more energy efficient homes or make them more energy efficient after purchase.

However, there would be tax incentives and disincentives on either side.

Spokesman for the EEIG David Adams said: “Stamp duty would be calculated then nudged up and down around a neutral point based on the energy performance of that dwelling, so the better performing the home from an energy perspective, the lower the stamp duty paid.”

If a buyer undertakes low energy and carbon improvements within the first two years of owning the property, and obtains an updated, better EPC, they would be eligible for a stamp duty rebate.

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“Any recognised improvement in a home’s energy efficiency will reduce the SDLT paid,” said the EEIG.

However, the letter did suggest that a rebate may not cover the full cost of the works that take place.

The letter read: “An Energy Saving Stamp Duty Incentive is not a silver bullet – and we are not suggesting that any rebate should cover the full cost of works that might be needed.

“We are, however, proposing a rebate significant enough to get homebuyers’ attention and create the conditions for homeowners and purchasers to invest in, and improve, their own homes.

“We need to encourage home purchasers’ involvement and action when disruption is least and ensure retrofit activity is steady over the long term, to deliver lowest cost and best quality – where businesses are confident to invest and trade on their reputation, not struggling to expand when grants are available and focused on downsizing when they are gone.”

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People who buy homes with low EPCs, like large, old properties, could end up paying significantly more stamp duty.

Dice, a Nottingham-based engineering consultancy, said they welcome the incentives around sustainability but are concerned that this proposal could have an impact on the housing market.

For example, people who already own homes with poor EPC ratings who are looking to sell, could end up “struggling” as they compete with “greener homes”.

Raj Somal, Director at Dice said: “While it is always good to try to come up with ideas surrounding incentives for sustainability, this idea misses the mark a little.

“Encouraging people to buy a home with a good EPC to qualify for a reduction in stamp duty does not necessarily solve the problem of homes with ‘poor’ EPCs.

“It may leave the owners of these homes struggling to sell, when competing with homes that are greener – leaving them trapped in the housing market.

“And if people can’t afford to make the necessary changes to their homes to improve the EPC rating, this incentive does little to help them out.”

Dice think that a better solution would be to introduce specific grants for home improvements which would give all homes the chance to be more sustainable rather than furthering the market gap between more energy efficient homes and others.

Homes contribute an estimated 20 percent of carbon emissions in the UK, with older homes tending to lose a lot more energy compared to newer homes.

Homes without proper insulation may need to produce more carbon emissions to keep the property warm.

Dice thinks that money and legislation is needed to help bring existing homes with poor green credentials up to scratch, so they are at a similar level to new builds which are now being built to the highest environmentally-friendly standards.

A Government spokesman told The Daily Telegraph: “We believe everybody deserves to live in a decent and safe home, and our reforms will deliver a fairer system for all, supporting homeowners and landlords to improve their home energy performance, cut energy bills and increase consumer choice.

“Huge progress is already being made to the energy efficiency of UK homes, and we are investing almost £6.6bn to support people to install energy efficiency measures across the UK.”

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