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File image of Finance Minister Michael McGrath Alamy Stock Photo
landlord tax

Department warned Finance Minister against tax break for landlords in Budget 2024

Freedom of Information records show senior officials within the Department of Finance warned against the introduction of the tax break for landlords.

OFFICIALS WITHIN THE Department of Finance warned against the tax break for landlords that was introduced in Budget 2024.

Department officials also estimated that more than one in four landlords will pay no income tax on the rents they charge as a result of the tax break.

The documents were released to Sinn Féin under the Freedom of Information Act.

The tax break is for landlords who agree to stay in the market for the next four years and the relief will run from 2024 to 2027. 

Landlords will be entitled to have rental income of up to €3,000 tax free at the standard rate (20%) in 2024.

This will rise to €4,000 in 2025 and €5,000 for years 2026 and 2027.

This means a 20% saving on each amount per year.

So, next year landlords will get tax relief of €600. This will rise to €800 by 2025, and €1,000 for 2026 and 2027.

The relief will reduce the tax due on rental income by up to €600 in 2024, €800 in 2025, and €1,000 in 2026 and 2027.

However, it will be clawed back if the landlord leaves the rental market between 2024 and the end of 2027.

In documents prepared by senior officials within the Department and released under the FOI act, there was an original plan to allow landlords a rental income tax disregard of up to €10,000.

This was later scaled down to €5,000.

The documents also noted that “there is already a significant amount of tax relief available to individuals who are landlords” and advised that the Tax Division did not recommend a rental income disregard.

It was further stated that “Ireland’s past experience with tax incentives in the property sector strongly suggests the need for a cautionary stance in this area”.

A second document re-iterated these concerns and stated: “A tax relief will only work in this regard if tax is a primary factor causing people to exit the rental sector and a primary factor in dissuading people from entering it.

“The evidence available does not appear to support this case, as such, it raises the question how effective tax relief will be in achieving this aim.”

Department officials reference a Residential Tenancies Board report from June 2021 that found only 6% of small landlords cited taxation as a motive for leaving the market.

A later document then called for the tax relief to have a “sunset clause of three years to end in 2026 as is standard practice as it is required by the Department’s Tax Expenditure Guidelines”.

However, Finance Minister Michael McGrath decided that “on balance” a period of three years is too short.

He proposed that the relief be extended for four years, to 2027.

Commenting on the documents, Sinn Féin’s finance spokesperson Pearse Doherty said: “In reality, thousands more landlords will be able to reduce their tax liability to zero after claiming existing capital allowances.

“Officials were also right to warn that this tax break raised serious issues around fairness for our tax system – why should nurses, gardaí, teachers and other workers pay more tax than landlords will on their rental income?”

Doherty also remarked that “Department officials were clear in their advice that this tax break is unlikely to have any impact in preventing some landlords from selling their properties”.

Doherty accused the government of ignoring all the “evidence and advice from their own officials that this tax break was unfair, costly and ineffective” and remarked that “government pressed ahead with an unequitable sop to landlords that will do nothing to increase housing supply or improve affordability”.

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