New Energy Efficiency Rules for Landlords: What You Need to Know

The government has now set out plans for the most significant changes to private rental sector energy standards in over a decade.

If you’re a landlord in South London, these proposed new requirements are expected to affect you by 2030 – and there are important steps you should be taking now.

What Is Set to Change?

The government has announced its intention that from 1st October 2030, all privately rented properties will need to meet the equivalent of EPC Band C or have a valid exemption. This would be a significant step up from the current minimum of Band E that has been in place since 2020.

However – and it feels like this is standard when we write these sorts of articles – there is an important twist!

The government is proposing to reform how EPCs work. Instead of just the single energy efficiency rating we’re used to, future EPCs (expected from late 2026) are likely to show multiple metrics:

• Fabric performance (insulation, windows, doors)
• Heating system (boiler, heat pump, etc.)
• Smart readiness (solar panels, batteries, smart meters)

Under the current proposals, your property would need to meet a Band C‑equivalent level on the fabric metric first, then Band C on either the heating system or smart readiness metric – with that second route being your choice.

Some Good News: Early Action Will Be Rewarded

If your property already achieves EPC Band C under the current system before 1st October 2029, current indications are that you will benefit under so‑called “grandfathering” provisions.

The government’s response suggests that these properties would be treated as compliant under the new system until that EPC expires (up to 10 years), even once the new metrics are introduced.

This could prove to be crucial: it means landlords who act now using today’s EPC recommendations are unlikely to be penalised when the new system arrives. In fact, you gain greater certainty and may not need to worry about the new metrics at all until your current EPC expires.

These are as yet proposals, remember – this could all yet change. Which means it may be a gamble on your part to do this ahead of 2029; nevertheless, it may prove one worth taking.

More Good News: Investment Required Lower Than Expected

The government originally floated a £15,000 cost cap per property, but following consultation feedback – including from thousands of landlords and lobbying from the lettings industry – this has been reduced in the latest proposals to £10,000.

Even better, analysis in accompanying impact assessments suggests the average spend per property is expected to be significantly lower than this – between £5,000-£6,000, rather than the full £10,000.

If you invest in relevant improvements and, on hitting that cap, find the property still doesn’t meet the standard, you will be able to register a 10‑year exemption and continue letting.

Importantly, any qualifying improvements you make from 1st October 2025 onwards will count toward this cap, which is designed to encourage early action rather than last‑minute rushes.

Relief for Lower-Value Properties

The government has proposed an “affordability exemption” for properties valued below £100,000. For these properties, the cap is lower, effectively set at 10% of the property’s value rather than the full £10,000.

For example, a property worth £70,000 would only require investment up to £7,000 before an exemption could be claimed. This recognises that lower‑value properties often generate lower rental returns.

The benefit in South London – given average property values of just over £600,000 across the borough of Lambeth, according to data from the Office for National Statistics – is, we imagine, non‑existent! But, for balance and completeness, this is what has been proposed.

Making Use of Grant Funding

If you are worried about the costs involved in improving the energy efficiency of your property, it is worth noting that there is third‑party funding available – including government grants – and this funding is expected to count toward your £10,000 cap.

The Warm Homes: Local Grant scheme and other programmes may be available to eligible landlords – see link here for information.

There is an important exception: Boiler Upgrade Scheme (BUS) grants (£7,500 for heat pumps) do not count towards the cost cap.

But this does mean, for example, that if you have £3,500 left under your cap, you could install an £11,000 heat pump using the BUS grant – effectively getting a low‑carbon heating system installed within your investment limit.

Exemptions

The government has seemingly taken onboard some of the concerns that have been raised by the lettings sector and landlord groups, and has proposed an expanded exemptions regime, including:

• Solid wall insulation (SWI) exemption: If your property would need SWI to meet the new ‘fabric standard’ but you choose not to install it (perhaps due to concerns about damp or aesthetics), you would be able to register an exemption.
• Negative impacts exemption: If you can evidence that a measure would damage your property or devalue it by 5% or more, an exemption is available. This seems somewhat of a grey area at this stage; we expect that a Red Book or other formal valuation report by a chartered surveyor is likely to be required.
• Third‑party consent: Still applies where freeholders, planning authorities, or tenants refuse permission.
• New landlord exemption: Applies to anyone acquiring a tenanted property, giving six months to comply.

Most exemptions are expected to last 5 years, but the cost cap exemption is expected to last 10 years, which again should help reduce the administrative burden.

Tax and VAT Considerations

The zero‑rate VAT on energy efficiency installations (insulation, heat pumps, etc.) continues until March 2027 under current rules, which could represent a significant saving – but of course the clock is ticking.

Additionally, HMRC guidance and tax commentary indicate that replacing an existing heating system with a modern equivalent can, in some circumstances, be treated as a repair or maintenance cost and deducted from rental income for tax purposes, rather than being capital expenditure. This will depend on the specific facts and on how HMRC views the works, so specialist tax advice is strongly recommended before assuming a particular installation (such as a heat pump) will qualify as a revenue expense.

What Steps Should You Take Now?

1. Check your EPCs
Know where you stand. Properties already at Band C or close to it should consider upgrading before October 2029 to benefit from likely grandfathering.

2. Budget for improvements
The proposed compliance date might be 2030, but that is now only four years away. Planning now allows you to spread costs, make use of any void periods to carry out works, and avoid last‑minute, stressful projects as 2030 approaches.

3. Consider available grants
Check eligibility for schemes like the Boiler Upgrade Scheme or local authority grants linked to the Warm Homes Plan.

4. Use quality installers
Government strongly recommends TrustMark‑accredited installers following PAS 2035 standards to ensure quality work and consumer protection.

5. Keep records
From 1st October 2025, save all receipts for qualifying improvements, as they are expected to count toward your cost cap.

The Bottom Line

These changes represent a clear step‑up in requirements, and many landlords will understandably see them as a burden. We recognise that, but the government has at least shown some willingness to listen to landlord and industry concerns.

The reduced cost cap, proposed grandfathering provisions, expanded exemptions, and recognition of early action should all help make compliance more manageable – even if they don’t remove the challenge entirely.

With a few years until the anticipated compliance deadline, landlords who plan ahead – particularly those who can achieve a Band C on current EPCs before October 2029 – are likely to find themselves in a strong position as the new regime takes effect.

As always, we’re here to help guide you through these changes and to ensure your property remains compliant and attractive to tenants as the rules evolve.