23 August 2022

Should SDLT go “green”?

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?


This note reflects the law as at 23 August 2022. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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