There has been a huge amount of talk around EPCs, energy efficiency and legislative change over the past few months and it’s important that these issues remain firmly on the radar of all landlords, especially those with older properties in their portfolios.

In the recent Spring Statement, we saw the chancellor offer support for property owners with the announcement that they will pay zero per cent VAT on materials for improving the energy efficiency of their properties, down from five per cent VAT relief. This is a positive move that will help landlords reduce outgoings during any rental voids and help tenants mitigate rising living costs. However, there has been plenty of ambiguity involving environmental schemes in the past and it’s important for property owners to be aware of exactly how and where they can benefit from such incentives.

Energy efficiency is a particularly tricky balancing act for landlords as cost implications are apparent. Research from Shawbrook recently highlighted that landlords could lose up to £9,500 a year in rental income if they are unable to make sufficient upgrades to their property ahead of the proposed EPC regulation changes and 2025 deadline.

A whitepaper entitled Confronting the EPC Challenge published by the lender showed that 30% of landlords have not yet made any energy efficiency updates to their properties, with most claiming that works will start within the coming 14 months. A total of 10% of landlords said they won’t be starting any works for three or four years, cutting it close to the proposed 2025 deadline.

And 42% admitted that their tenants would need to leave the properties during the improvement works, with 38% expecting their properties to be vacant for four weeks at a cost of £5,000 in rental income.

Meanwhile, 23% of landlords said their properties are currently rated D or below so would face being unable to begin a new tenancy from 2025 unless improvements are made, should the proposed regulations be implemented. The research also found that, on average, landlords expect the improvements to cost £5,900, but only 31% currently have the necessary funds available to pay for the proposed changes.

There are a few worrying elements within this data which need addressing sooner rather than later. So, what can landlords be doing to help cover these costs?

The obvious first step is to seek good, professional advice when refinancing buy-to-let (BTL_ properties or diversifying portfolios. This also includes the ability to explore and source a range of alternative funding options to help renovate individual properties falling beyond the C band.

Making full use of all available tax reliefs can also help landlords to prepare for upcoming EPC changes. Despite a reduction in the amount of relief that landlords can claim on the interest they pay on their mortgages, a report from Ludlowthompson recently suggested that UK BTL landlords claimed more in tax relief during 2021 than the previous year – £18.5bn compared to £18.1bn in 2020.

Additionally, the report pointed out that care must be taken to ensure improvements related to energy efficiency do not count as capital improvements, which would not be eligible for tax relief. However, improvements such as installing double glazing and up-to-date boilers would be allowable under repairs, maintenance and renewals.

These are just some of the options available to landlords. But one thing is a must and that is not to ignore these green implications, as putting off work could prove financially detrimental in the longer term.

Cat Armstrong is mortgage club director at Dynamo for Intermediaries