Homebuyers to pay thousands more in stamp duty if their properties not energy efficient

Homebuyers would be forced to pay thousands of pounds extra in tax if they buy a property that doesn't meet tough climate change targets, under plans being considered by the Government.

The higher rate of stamp duty would hit millions of 'energy guzzling' homes with draughty windows, insufficient loft insulation and old inefficient boilers.

The controversial proposals are aimed at slashing the UK's greenhouse gas emissions.

Yesterday, critics warned that a hike in stamp duty could hit the property market and be disastrous for the economy.

The proposals would be introduced alongside the Government's Green Deal - a £90 billion scheme to cut the fuel bills of 14 million homes.

Under the Green Deal, householders will be offered "free" green makeovers by energy companies, local councils or DIY chains from 2012.

The money spent on new insulation, double glazing or replacement boilers will be claimed back from the savings made in energy bills.

The Government says the green makeovers are essential if the UK is to meet its legally binding targets of cutting greenhouse gas emissions by 34 per cent of their 1990 levels within 10 years.

However, ministers are concerned that the green incentives may not be enough.

The proposals for variable stamp duty to force more people to take part in the Green Deal were raised last month in a report by the Green Investment Bank Commission - an advisory body set up by the Labour Government last year.

The report was authored by Bob Wigley, chairman of the Yell Group and one of the biggest names in British business.

It called for new policies to help green up homes and added: ''Ultimately, either implementing penalty rates of stamp duty for houses purchased where the buyer does not implement available energy efficiency measures or setting minimum standards on properties, will be required.'

Under one scenario being considered by ministers, people who buy a poorly insulated property would have to pay an extra 0.5 per cent levy on top of the normal stamp duty.

If the buyers improve the energy efficiency within a year, they would get the money back as a tax rebate.

Since 2008 all homes put up for sale have had an energy performance certificate, which ranks them on a scale from A for the best, to G for the least efficient.

To avoid paying the higher stamp duty, a home would need to be upgraded to at least a band E.

Last year the UK Green Buildings Council came up with similar proposals - claiming that green loans for insulation would only take off if the "carrot and stick" approach was used.

The Department of Energy and Climate Change confirmed that the Government was considering a variable stamp duty rate to encourage people to green up their homes.

'There are many incentives that we are considering to tackle home efficiency. No final decision has been made, but we are considering it,' a spokesman said.

John O’Connell, deputy research director of the TaxPayers’ Alliance, said: “Just when the housing market is starting to pick up, it would be madness to throw in a punitive tax like this that could put people off buying altogether.

'Offering a rebate on the duty if new homeowners make the government’s required upgrades is useless as buyers will still have to stump up for arbitrary upgrades.

'Requiring expensive upgrades to people’s homes now, when so many people are struggling to just get on and stay on the property ladder, is particularly awful timing.

"This will completely distort the market and mean buyers will have to lower their expectations. It’s clearly more stick than carrot and the idea should be thrown in the recycling bin immediately.”

Article from: www.dailymail.co.uk 29/07/10

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