Sunday, 22 May 2022

VAT cut on energy saving measures

ONE of the measures announced in the Chancellor’s spring statement last week was a reduction in VAT on the installation of energy saving materials in residential properties.

The rate will drop from five per cent to zero for the next five years.

Other than that, the mini-budget contained very little that will affect the housing sector or rising household energy bills.

David Parker, ratings director at Savills, said: “An extension of VAT relief on the installation of ESMs is promising.

“Until now, VAT on
batteries and solar has been as much as 20 per cent in some cases and the cost and paperwork involved can act as a significant deterrent
for those considering
installation.

“However, VAT cuts on residential property installation may have little impact, replacing the household improvements rate that has been dropped and, notably, not being made available to all. At only five per cent, it seems unlikely to influence purchasing decisions or significantly improve affordability.”

Timothy Douglas, head of policy and campaigns for the estate agency membership body Propertymark, said: “We welcome the announcement that VAT will be cut on the installation of energy saving materials in residential properties.

“With rising energy costs as well as looming energy efficiency targets for the property sector, financial incentives are needed. We will be scrutinising the details of this scheme as they are released to ensure they have the maximum impact for all homeowners, including investors in the private rented sector.”

Martin Lewis, of
consumer website Money
SavingExpert.com, said: “If that’s all he’s doing on energy, it is limited and won’t impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October.”

Chris Druce, senior research analyst at Knight Frank, said: “Measures announced in the spring statement, including a 5p reduction in fuel duty and increase in the National Insurance threshold, will soften the impact of the rising cost of living.

“However, pressure on personal finances will mount.

“With the cost of borrowing set to continue climbing to combat inflation, which is at a 30-year high of 6.2 per cent and forecast to peak above eight per cent this year, we can expect to see house price growth and demand moderate.

“It means that with supply currently tight, demand strong and mortgage rates low, there is a clear window of opportunity open for buyers and sellers to act now.”

Property

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