GREEN STAMP DUTY LAND TAX

Green Stamp Duty Land Tax (SDLT) Incentive:
the benefits and key elements

The Government has set itself a target of a 78% reduction of UK greenhouse emissions by 2035. The need for long term structural incentives is now urgent because short term incentives (such as the recent Green Homes Grant) have failed to deliver the kind of take up necessary to address the problem of carbon emissions from UK housing. Indeed, emissions from homes have increased, rather than fallen, over the last 6 years; 29 million homes now account for 20% of UK carbon emissions.

Key benefits of the Green Stamp Duty Incentive

The value of the UK’s housing stock has risen circa 9% (£450 bn) in the last 12 months. To meet its carbon targets, the Government needs to incentivise these owners (60% of UK houses) whose investment in their homes can be unlocked through a green stamp duty incentive which:

  • creates a powerful statement of intent but not a subsidy: it remains revenue neutral and does not increase energy bills;
  • allows targeting of subsidies: necessary subsidies focused on those without means or access to finance;
  • makes energy-efficient homes cheaper to buy without imposing costs onto struggling families;
  • rewards homeownerswho want to act, encourages purchasers to seek good information, and energises the green mortgage market;
  • reminds homebuyers considering a lower-performing home of the improvements that are likely to be necessary during their tenure and consider these at the time of purchase;
  • establishes a stable UK wide home retrofit market creating a sustainable supply chain, jobs, and skills;
  • provides confidence to business, mitigating grant driven boom-bust cycles which undermines appetite to invest.

To verify performance improvements, this policy needs to be underpinned by an EPC regime based on real, verified, performance data. This will simultaneously enhance house building standards and give homeowners the ability to hold installers to account for the quality of their work.


Key elements of the Green Stamp Duty proposal:

  • As is already a requirement, the energy performance of a house (measured through its EPC) is calculated at the point of sale. 
  • The energy demand and carbon performance of the home is used to adjust basic SDLT value relative to a ‘neutral’ SDLT level set by HMT (set annually to ensure revenue neutrality).
  • To encourage the home buying market to place greater value on energy efficiency, the stamp duty calculation will be adjusted down and up: For a particular house price, the better the energy efficiency, the lower the stamp duty paid. 
  • If the purchaser undertakes low energy and carbon improvements within the first 24 months and obtains an updated EPC, they would be eligible for a SDLT rebate
  • Any recognised improvement in a home’s energy efficiency will reduce the SDLT paid.

Successful UK retrofitting, backed by a real-performance regime, will not only decrease our net carbon emissions in line with government objectives but also increase the standard of living for over 29 million homeowners. It will also offer the opportunity for the UK to become a global leader in house retrofits with pioneering technology. 


There is already growing support for a Green Stamp Duty (SDLT) incentive:

  • The Committee on Climate Change: “[there are] a lack of incentives for retrofitting existing properties
  • The Committee on Climate Change said in its June 2021 Report to Parliament on Progress in Reducing Emissions that: There has been little of the necessary progress in upgrading the buildingstock.. Despite a small improvement in the rates of heat pump installation, these remain far below the levels that are necessary.”  
  • The Environmental Audit Committee recommends that the Government should consider a “stamp duty rebate for homeowners that improve the efficiency of their homes
  • A group chaired by Nationwide Building Society including: British Gas, Energiesprong UK, E.ON, The Federation of Master Builders, Igloo Regeneration, Legal & General Modular Homes, Midas Group Ltd, UCL Energy Institute, Rockwool, Smart Metering Systems, Switchd, and Trustmark recently called on the Government to deliver policy interventions including a Stamp Duty Incentive, in order to meet 2050 net zero targets

The UK Green Building Council (UKGBC) published a new report in April 2021, entitled A housing market catalyst to drive carbon emission reductions Low energy adjustment to Stamp Duty Land Tax, showing how a stamp duty incentive could help transform the energy and carbon performance of the nation’s homes.

The report demonstrates how a modest adjustment to Stamp Duty Land Tax could catalyse and drive the market to deliver both energy efficiency improvements and low carbon heat and power, whilst also being revenue neutral to HM Treasury.

READ REPORT


For more information, please contact:

David Adams, EEIG SDLT spokesman at david@theeeig.co.uk