Expenses to improve a EPC rating on BTL – capital or revenue?

Expenses to improve a EPC rating on BTL – capital or revenue?

13:18 PM, 30th January 2023, About A year ago 9

Text Size

Hello, Hopefully, most prospective landlords would make checking the EPC one of their first tasks when looking at a property to buy. But say you inherit a property you want to use for a buy-to-let. The property is in a good state of repair, was inhabited up to inheritance, and is fit to rent out straight away.

Only problem is the EPC rating is F – technically making it unfit for use as a BTL.

The wise Landlord at this point might say sell it and walk away, but let’s say for the sake of argument the property has good potential for capital growth and there’s a sentimental attachment.

The only way to increase the EPC rating would involve digging up and insulating cement floors, ripping down ceilings to install insulation, and insulated plasterboard internally – all which would involve building works to some extent, but which would also (in theory anyway!) increase the long term value of the property.

Would the expenses necessary to improve the EPC be classed as a revenue expense as the property was technically habitable/lettable as was, or capital as it otherwise wouldn’t be “fit for use” and involves building works that increase value?

Thank you,


Share This Article



10:24 AM, 31st January 2023, About A year ago

I believe HMRC would treat this as capital expenditure given how significant the developments would be. And then you have the problem of extra finance costs that you are no longer able to deduct. I think that should change but I suspect that's your answer; I think that it shouldn't be this way.

But I believe one of the other options is that you may be able to claim some kind of exemption for a property. I don't have the details though.

Chris Rattew

11:36 AM, 31st January 2023, About A year ago

This should be treated like double glazing, which is treated as a repair, although it is an improvement. This is because the replacements were in the current standard. Also the new will have the same function and purpose as the current structure, so they are really replacements. Ensure that your arguments are clear with the accountant before submitting the tax returns.


11:40 AM, 31st January 2023, About A year ago

Sounds like capital, because the property is not currently available to let. That could change if you were to advertise it, then do the work to make it 'habitable' rather than 'improve' it. Otherwise, it will be claimed against CGT when you sell.


11:46 AM, 31st January 2023, About A year ago

Reply to the comment left by Christopher Rattew at 31/01/2023 - 11:36
Any idea whether photovoltaics, wind-generators, ground-source heat pumps and air-source heat pumps are capital expenditure or revenue expenditure? And suppose you fit a back-boiler of some kind to an existing stove that burns solid fuel; is that capex or revenue expenditure?

Are these really replacements?

Jireh Homes

16:48 PM, 31st January 2023, About A year ago

Depends on the improvement works. We installed gas CH as upgrade from electric heater and allocated to Capital, where-as changing windows accepted as Revenue. So generally if upgrading an existing feature then charge to revenue or if introduce a new feature then Capital expenditure. Thus PV or ASHP could be argued as upgrade to existing, or capital if this would be preferred.


7:16 AM, 2nd February 2023, About A year ago

You haven't said what type of property it is, but from the proposed works, I think you are going to struggle to get it to a C.

Insulating a solid floor doesn't actually help much, neither does insulated plasterboard.


10:20 AM, 2nd February 2023, About A year ago

Reply to the comment left by Smiffy at 02/02/2023 - 07:16
When I saw the phrase "insulated plasterboard I assumed dry-line but I don't know whether this is right; it might have meant celotex. Either way it sounded like the best way to get this property rentable might be to apply for an exemption, although I don't know much about this.


12:32 PM, 2nd February 2023, About A year ago

You can get an exemption from works required if you can establish that the cost is prohibitive. Check out the Gov.uk website and see if it applies to you

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now