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Cost Cap and Exemptions: Complete Guide for Landlords

Understanding the GBP 10,000 cost cap, how to calculate if you qualify for exemption, and the risks of relying on the exemption pathway.

Written by EPCGuide Team
10 min read

The EPC regulations include exemptions for landlords who cannot achieve the minimum rating despite reasonable effort. The most important of these is the cost cap exemption, which from October 2030 is set at £10,000 including VAT.

However, exemptions are not a simple escape route. You must first invest up to the cap on qualifying improvements, maintain detailed evidence, and re-register every five years. This guide explains exactly how the cost cap works and when you might qualify for exemption.

Understanding the £10,000 Cost Cap

The cost cap exists to protect landlords from disproportionate expense. If the cost of achieving EPC C would exceed the cap, the landlord can register for exemption after making improvements up to that value. The key principle is that exemption is a last resort, not a first option.

What the Cost Cap IS

  • A threshold for exemption eligibility
  • The maximum you must spend before claiming exemption
  • Inclusive of VAT on improvement costs
  • Applied per property, not per landlord

What the Cost Cap is NOT

  • A limit on how much you can or should spend
  • An automatic exemption without evidence
  • A way to avoid all improvements
  • Inclusive of EPC assessment costs (only improvements count)

Cost cap exemption decision-making documentation

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What Counts Towards the Cap?

Not all expenses count towards the £10,000 cap. Understanding what is included is crucial for accurate calculation and valid exemption claims.

Counts Towards Cap

  • Cost of energy efficiency improvements (materials and labour)
  • VAT on improvement works
  • Installation costs for qualifying measures
  • Scaffolding if required for improvement installation
  • Making good after improvement works

Does NOT Count Towards Cap

  • EPC assessment fees
  • Professional advice or survey costs
  • General repairs or maintenance
  • Decorative works
  • Works not recommended on EPC or by qualified assessor

Cost Cap Calculation Example

Consider a Victorian terrace currently rated E (score 48). The EPC recommends these improvements:

ImprovementEstimated CostEPC PointsRunning Total
Loft insulation (top-up to 270mm)£450+4£450
Cavity wall insulation£1,200+8£1,650
New condensing boiler£3,500+6£5,150
Double glazing (single to double)£6,500+5£11,650
Total£11,650+23-

Result: Total improvements would cost £11,650 and raise the score from 48 to 71 (C rating). Since the first three improvements (£5,150) only raise the score to 66 (D rating), and the fourth improvement (£6,500) exceeds the remaining £4,850 of the cap, this landlord could:

  1. Complete the first three improvements for £5,150
  2. Attempt partial glazing improvements within the remaining £4,850 budget
  3. If still below C after spending £10,000, register cost cap exemption

Types of Exemptions

There are several exemption categories under MEES regulations. Each has specific requirements and evidence needed for registration. All exemptions must be registered on the PRS Exemptions Register before letting the property.

Cost Cap Exemption

Available when spending up to £10,000 on qualifying improvements would not achieve the minimum EPC rating. This is the most commonly used exemption type.

Requirements:

  • Evidence that improvements have been made up to the cap value
  • Invoices and receipts for improvement works
  • Updated EPC showing rating after improvements (if improvements made)
  • OR three quotes demonstrating cheapest pathway exceeds cap
Duration: 5 years

Devaluation Exemption

Available when a qualifying surveyor provides written opinion that the required improvements would reduce the market value of the property by more than 5%.

Requirements:

  • Written valuation from RICS-qualified surveyor
  • Surveyor must assess value before and after proposed improvements
  • Devaluation must exceed 5% of current market value
Duration: 5 years

Wall Insulation Exemption

Available when wall insulation is the only recommended improvement but installing it would have a negative impact on the property. This exemption applies specifically to solid wall, cavity wall, or external wall insulation.

Qualifying Conditions:

  • Wall insulation would cause damage to the structure or fabric
  • Property has existing moisture or damp issues that would worsen
  • Wall type is unsuitable for available insulation methods

Evidence Required:

  • Written report from a suitably qualified expert
  • Expert must be a member of a relevant professional body
Duration: 5 years

New Landlord Exemption

A temporary exemption for landlords who have recently become landlords of a non-compliant property, allowing time to make improvements.

Situations Covered:

  • Property acquired with existing tenant in place
  • Property inherited or received as gift with existing tenancy
  • Tenancy becomes qualifying through change in circumstances
Duration: 6 months only

How to Register an Exemption

All exemptions must be registered on the PRS Exemptions Register before the property can be legally let. Registration is an online process but requires supporting evidence.

1

Gather Evidence

Collect all documentation supporting your exemption claim: invoices, quotes, expert reports, correspondence with third parties, and before/after EPCs as applicable.

2

Access the Register

Visit the PRS Exemptions Register website and create an account or log in.

Go to PRS Exemptions Register
3

Complete the Form

Provide property details, select exemption type, and upload supporting evidence. You will need: property address, current EPC reference number, exemption category, and evidence documents.

4

Submit and Confirm

Submit your application. Once registered, the exemption is valid from the registration date. You will receive confirmation which you should keep for your records.

5

Set Renewal Reminder

Exemptions last 5 years (6 months for new landlord exemption). Set a reminder to reassess and re-register before expiry. Requirements may have changed by then.

Risks of Relying on Exemptions

While exemptions provide a legitimate pathway for properties that cannot achieve compliance, relying on them carries significant risks that landlords should consider carefully.

Public Visibility

The PRS Exemptions Register is public. Prospective tenants, letting agents, and others can see that your property has an exemption registered. This may affect tenant interest and perceived property quality.

Sale Complications

Non-compliant properties may be harder to sell. Buyers who want to let the property inherit the compliance problem. Lenders may be reluctant to mortgage non-compliant buy-to-let properties.

Future Regulatory Risk

Regulations may tighten. The cost cap may increase. Exemption categories may narrow. What qualifies for exemption today may not qualify when you need to renew. Energy efficiency requirements have consistently increased over time.

Tenant Expectations

Tenants increasingly expect energy-efficient homes with lower running costs. Poor energy efficiency may lead to higher turnover, void periods, or difficulty attracting quality tenants.

Assess Your Options

Use our calculator to estimate improvement costs and see whether compliance or exemption is the right path for your property.

Related Guides

Regulations8 min read

EPC C 2030 Deadline

Full details on the October 2030 deadline and what it means for your properties.

Regulations12 min read

MEES Regulations Guide

Comprehensive guide to Minimum Energy Efficiency Standards and how they apply.

Sources

GOV.UK: Domestic Private Rented Property: Minimum Energy Efficiency Standard - Landlord Guidance(accessed January 2026)(opens in new tab)GOV.UK: PRS Exemptions Register(accessed January 2026)(opens in new tab)GOV.UK: Warm Homes Plan(accessed January 2026)(opens in new tab)