Property tax: What does it mean for you?

The Government has decided – yet again – to postpone its decision on just what it’s going to do with the Local Property Tax (LPT). The tax, which was first introduced back in 2013, hasn’t changed since, which means that we’re paying tax today on an asset that was valued some six years ago.

But homeowners are unlikely to bemoan this idiosyncrasy; after all, the delay means that no-one will see an increase in their local property tax bill over the coming year, while first time buyers will remain exempt from the tax, as will purchasers of new homes.

It’s good news right?

For homeowners right across the country, it’s undoubtedly good news; if the Government had opted to re-value homes, then those living in urban areas, particularly Dublin, would have faced substantial increases in their annual bill. Indeed the Government’s yield from the tax would have soared from about €482 million to €729 million.

The tax is levied at a rate of 0.18 per cent on the value of a property in a particular band; so a house worth €230,000 for example, is in the €200,000- €250,000 band. The tax was introduced on a self-assessed basis, which means that homeowners submitted their own valuation to Revenue.

Given that these valuations were based on 2013 values – and as the price register was only new, and sales were at particularly low levels, many homeowners would have estimated to the downside – it means that to suddenly switch to 2019 values would see most homeowners bill surge forwards.

Consider someone living in Dún Laoghaire in a house now worth €850,000; they’re only paying tax of €650 a year (including the local 15 per cent reduction). But if the tax was to be based on current values, they’d see their burden rocket to €1,338.

Now however, the Government has given everyone a year of reprieve, which means that they’ll continue to pay the tax at the current rate for 2020.

But will it continue like this?

Well, who knows? After all it’s not the first time that the tax has been postponed. The new valuation date is now November 1st 2020, which means that the Government has earned itself another year to make the tricky decision of just how it’s going to increase the tax burden.

And just what it will decide to do remains unclear. However, it’s unlikely that any increases will be muted, as the review group charged with assessing the future of the tax repeatedly cites a target yield of €500 million for the tax – and it came to €482 million last year.

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Then revenue chairwoman Josephine Feehily speaking at a briefing by Revenue on the Local Property Tax in 2013.
Then  chairwoman Josephine Feehily speaking at a briefing by Revenue on the Local Property Tax in 2013.

So what are the options?

As mentioned above, revaluing properties at current prices will lead to substantial hikes so is unlikely to happen.

The first option then is to collect enough to bring in €500 million a year; this would see properties valued at current rates but the rate charged fall to 0.114 per cent, resulting in a small uptick for homeowners. However the increases will differ substantially – €170 for someone in Dublin city but just €2 in Meath.

The second option is to fix the tax based on funding requirements for local authorities. But again this approach has significant anomalies – a homeowner in Co. Monaghan will face the biggest increase, of €157, while our Dublin city dweller gets an increase of just €46.

A third scenario would see a different rate applied in each valuation band, again with the goal of raising €500 million – this time our Dublin city homeowner would pay the largest increase, of €174, while our Meath dweller pays just €7 more.

A fourth option is the same as the third, but to impose a minimum first valuation band at a liability of €90; while a fifth is to increase all of the valuation band thresholds by 80 per cent.



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