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Stamp Duty relief for zero-carbon homes

The Government should reintroduce a Stamp Duty relief for purchases of homes that meet a specified standard of energy efficiency.

A Stamp Duty relief for zero-carbon homes ran from October 2007 for five years. It gave a total relief for purchases of new zero carbon homes under £500,000 and a Stamp Duty saving of £15,000 for purchases of new zero carbon homes over £500,000. In practice, in order for a house or flat to have met the criteria it needed to be insulated, have triple glazed windows and come with renewable power. The seller had the responsibility to ensure that the home met the criteria and give a certificate, issued by an accredited assessor, confirming that the home qualified for the relief.

How would Stamp Duty relief encourage energy efficient homes?

Over recent years, the Government has used Stamp Duty as a device to try to reduce the demand for buy-to-let properties and second homes, especially among non-residents. By reintroducing the relief, it would use Stamp Duty as a device to increase the demand for energy-efficient homes. But rather than switch back on the 2007 relief, we think the relief should be available for all dwellings – not just new homes – and should be ratcheted against the energy efficiency of the dwelling in a similar way that the benefit in kind charge for company cars is graduated for the energy efficiency of the car.

A full relief would apply to the purchase of a dwelling where the net CO2 emissions from the dwelling over the course of a year calculated in accordance with approved methodology are zero kilograms per square metre (kg/m²/year). A partial relief would apply to dwellings where the net CO2 emissions are greater than zero kg/m²/year until the net CO2 emissions exceed a specific threshold. And, for high polluting dwellings, a negative relief (or surcharge) could apply. If this is too complicated, a simpler alternative would be to align the relief thresholds with Energy Performance Certificate ratings – from A (most efficient) to G (lease efficient) – which are usually produced as part of the conveyancing process.

Driving the demand for energy efficient homes

The Stamp Duty holiday has shown the extent to which Stamp Duty incentives can drive demand. A relief like the one we propose could channel that demand to energy-efficient homes. This would surely encourage housebuilders, as well as private sellers, to consider making green upgrades to improve the energy efficiency of the dwelling before marketing the property for sale to make the dwelling financially more attractive to the market or to help achieve the desired sale price.

Contact us

If you would like to discuss any of the above please contact your usual Blick Rothenberg contact or Sean Randall, using the details on this page.

You can also visit our COP26 Hub where we will share an article written by our experts each day the COP26 conference takes place with a focus on green taxation.