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Explainer: What will the changes to the Local Property Tax mean for your yearly bill?

All properties are set to be revalued for the charge on 1 November.

Minister Donohoe 004 Source: Sam Boal/RollingNews.ie

FINANCE MINISTER PASCHAL Donohoe earlier today confirmed the details of the proposed update to the Local Property Tax (LPT) regime. 

Donohoe said that just over half of homeowners will have no change to their LPT charge, with just over a third of people seeing an increase. 

The context for the changes is the steady increase in the value of property since the LPT was first introduced and what the government says is the need to adjust it accordingly. 

Here’s a brief outline of what you should know about the changes.

First off, what is the LPT? 

The Local Property Tax is an annual charge on all residential properties in the State which came into effect in 2013. Essentially, if you own a residential property you must pay the tax. 

The amount you pay is based on the value of your property, which is self-assessed. There are 20 different LPT bands to cover increasing property values. 

Under the current rates, which have been in place since LPT was introduced, the bottom two bands have a fixed rate charge of €90 and €225. 

The bands above that are charged at a rate of 0.18% of value up to €1 million, with properties worth more than that charged 0.18% of the value up to €1 million and 0.25% on the portion above that. 

The charge is measured at the mid-point within a band.

So it hasn’t changed in eight years?

That’s right, there’s been no change in LPT rates in that period and perhaps more significantly the valuation of properties for LPT purposes have not changed either. 

It means the value of properties for LPT purposes has not changed since the first valuation date of 1 May 2013. 

The revaluation date was first postponed from 2016 to 2019 before it was postponed again for another year to November 2020 before being postponed again. 

The government’s new property tax amendment bill would see properties being revalued for LPT on 1 November 2021 before being reviewed every four years. 

Haven’t property prices surged, does this mean my LPT will too? 

shutterstock_95917558 Source: Shutterstock

Yes, property prices have surged but no your LPT will not necessarily change. It could increase but the increase will not be the same as the change in the value of your property. 

Property prices have surged in the past 18 months on top of steady increases in the preceding years. It means that prices are significantly higher than the last LPT valuation in 2013. 

To account for rising prices, while the number of LPT bands remains at 20, their limits have increased and they have widened by 75%. 

For example, band 10 was previously between €500,001 – €550,000 but is now between €875,001 – €962,500. 

This is what the bands now look like

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As you may have noticed in the final line, the actual effective rate of the LPT is to be cut across most bands from the current rate of 0.18% to 0.1029%. 

So for the large majority of homeowners, the value on which their LPT is calculated is increasing while the percentage rate is decreasing. 

For the lowest bands (1 and 2) they have been widened but the flat rate remains the same at €90 and €225. 

What about the homeowners from the other bands, will they see increases?

Some will but the government has said these will be in the minority. 

The Department of Finance has estimated that 53% of homeowners will have no change to their charge, 36% will see an increase and 11% will see a decrease. 

Within that the department says that 3% of people will observe an increase of over €100, with the others facing an increase seeing one of below €100. 

In general, who will do well and who will lose out? 

It is difficult to say because it will depend on the value of properties in a given area and how they’ve developed over time, but the department provided a number of indicative examples. 

For example, a house that was valued at €250,000 in 2013 and is now estimated at €475,000 will see a move from band 4 to band 5 and a resulting increase in LPT from €405 to €495. 

A higher value property valued at €2.35 million in 2013 and now valued at €2.61 million will see it remain in band 20 but its charge decreased from €5,825 to €5,760. 

PastedImage-70817 Source: Shutterstock

Did I hear something about more homeowners being taken into the LPT?

Yes, properties built since 2013 were previously exempt from the LPT but this will no longer be the case as those homeowners are being brought into the net. 

The government estimates that this will add about 100,000 properties into LPT.

Asked about this today, Donnelly said it was important that “all properties are taxed in the same way… regardless of when they were built”. 

Overall, will the government be taking in additional tax?

Yes, the department estimates that there will be a yield of €560 million to the exchequer when the new rates are applied, with last year’s LPT raking in €480 million. 

This self-assessment, is it a case of people coming up with their own value for their property?

Yes and no. People freely submit their own LPT valuation but Revenue provides a tool so people have a rough guide what their property is worth. 

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For example, a person can enter the rough location of their property, the property type (detached, apartment etc.) and whether it was built before 2000. 

The tool will then give the homeowner a guide as to what band their property is valued at and the band they are . 

PastedImage-54797 Source: revenue.ie

The minister acknowledged today that there are “risks” that someone may undervalue their property to pay a lower rate but that “the vast majority” of homeowners “do their best” to provide an accurate valuation. 

If it is that case that Revenue becomes aware of an undervaluation, Donohoe said tax officials will “follow up on it”. 

Are there people who are exempt from LPT? 

Yes, aside from the new properties built after 2013, there are a number of exemptions that are relatively small and are outlined in detail here.  

One of the exemptions was for people who were forced to vacate their home due to illness as long as the home remained empty. Donohoe said today that he was removing the condition that the property remains empty because this may “free up residential properties for rental use”. 

Properties in Donegal and Mayo affected by ongoing pyrite and mica problems will have a temporary LPT exemption.

One exemption that is to be phased out however is for first-time buyers who had bought properties in ‘ghost estates’.

About the author:

Rónán Duffy

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