Home buyers could face tax bill for purchasing energy inefficient homes

The Government is considering introducing new stamp duty penalties to force property owners to make their homes more energy efficient.

Under the proposals, a person purchasing a house in the lowest energy efficiency bands (probably bands F and G) would have to pay an extra 0.5 per cent levy on top of their stamp duty bill. However, if the new owner upgraded the property to at least a band E within a year, the owner would be refunded the 0.5 per cent (and perhaps also receive a ‘bonus’ payment, as the Government looks to encourage homeowners to make their homes more energy efficient so that it meets its greenhouse gas emissions reduction targets.)

If the Government proceeds with these proposals, it is possible that they could be introduced in just two years’ time as part of the Government’s “Green Deal”, which includes measures to financially help homeowners make their properties more energy efficient.

It is thought that the Government was also considering banning owners of energy inefficient homes from putting them up for sale until they had been made more efficient; however, this idea was rejected as it could “trap” poorer families who couldn’t afford to make the improvements.

If these proposals are accepted, they could have a serious effect on the housing market. Any stamp duty penalties would put pressure on homeowners to upgrade their homes before putting them up for sale, as they would be less attractive to buyers. However, if homeowners can’t afford to make the changes, it may deter them from putting their homes up for sale. Also, purchasers, particularly first-time buyers who may have financially stretched themselves, may be reluctant to buy energy inefficient homes as they may be unable to afford to make the required upgrades in order to get their 0.5 per cent levy refunded.

We shall see what happens…