Green Homes...

The UK has committed to reducing its greenhouse gas emissions by 12.5% by 2010. Households account for over a quarter of all energy used in the UK and generate over a quarter of emissions. So encouraging homeowners to use energy more efficiently is key to meeting this target.

Announcing his tenth and final budget to Parliament on March 21st, the Chancellor urged lenders to make special loans and mortgages available for energy saving home improvements. He stated that the Government would “do its bit” by offering grants of up to £4,000 to help pensioners insulate their homes and install central heating.

Carrying out energy saving alterations to your home could lead to significant savings on your energy bills and give a boost to the value of your property, as an energy efficient home is likely to be attractive to prospective buyers. Installing cavity wall insulation, for example, could reduce heating bills by up to a third each year, as well as saving up to a tonne of carbon dioxide. Moreover, if you’re thinking of buying a new home, check out the availability of new “zero carbon” properties, as these will be exempt from stamp duty up to £500,000 until 2012.

For those hoping to get onto the property ladder, the Chancellor announced the launch of a competition to develop new loan packages to help first time buyers purchase a home. The winning package will be backed by the government and be made widely available. Watch this space.

This budget also contained good news for those wishing to buy a home abroad. Many prospective buyers wishing to buy abroad through a property company have been deterred by the prospect of having to pay tax on rents “earned” from their property – even if in fact it sits empty for half the year. This tax now looks set to be abolished.

Finally, the big news of this budget was the cut in the base rate from 22p to 20p in the pound. However, don’t assume this means more money in your pocket. The Chancellor has also abolished the 10% tax band and raised national insurance contributions. Instead of paying tax at 10% on the first £2,150 of your taxable income, then tax at 22% up to £39,825 and at 40% thereafter, from next April you will pay tax at 20% on all taxable income up to around £39,000, and will also have to make higher national insurance contributions.

However income from buy to let properties is generally exempt from national insurance contributions. So buy to let landlords will benefit from the cut in the base rate to 20% from next April without having to pay increased national insurance. Now is a good time to be in the buy to let business.

Adela Read
Financial Journalist

© Adela Read March 2007

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