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Column: 'In practice, how much help is the Help to Buy for first-time buyers?'

It depends largely on your personal circumstances. But if you are thinking of applying for this scheme then you would be wise to assess your eligibility and your options ASAP, writes Barry Flanagan.

Barry Flanagan Tax Director, Taxback.com

FOR MOST FIRST-TIME buyers, paying a deposit is the first stepping stone to getting your hands on those precious new home keys. But saving for a deposit is a major roadblock for many who dream of getting onto the property ladder.

When the government launched the Help to Buy (HTB) incentive in Budget 2017, one of its key goals was to tackle just this issue. But in practice, how much help is HTB for first-time buyers?

The answer to that question depends largely on your personal circumstances. But if you are thinking of applying for this scheme then you would be wise to assess your eligibility and your options ASAP. There have been numerous recent indications this year that the scheme could be adjusted or even scrapped come Budget time.

What is the HTB scheme?

HTB provides first-time buyers with an opportunity to get an income tax rebate (both on the income tax and deposit interest retention tax (DIRT) that you paid in Ireland over the previous four years) of 5 per cent of the purchase value of a newly built home, up to a value of €400,000. That translates to a maximum rebate of €20,000.

Properties costing €400,000 to €600,000 will qualify for the €20,000 rebate, but the scheme does not apply to homes over €600,000 in value (€500,000 if you bought it after 1 January 2017). Also, universal social charge (USC) or pay related social insurance (PRSI) are not taken into account when calculating how much you can claim.

The scheme is backdated to July 19 2016 and is currently set to run to December 31 2019. Currently, there have been 2,652 HTB claims and 2,035 of these have been approved.

To date, the incentive has been of more benefit to those buying houses in the lower to mid-range market and it is not just for those looking to purchase at upper end valuations. In fact, the most common claim is for a house with a value of €226-€300k – over a third of claims (35.14%) fall into this bracket. Furthermore, the most commonly claimed amount of relief is in the €10-15k bracket.

The limitations

While HTB can be a very useful for many first-time buyers, it does have its limitations. For example, if you are applying for HTB in the expectation that the government are just going to hand you €20,000, try not to get your hopes up too high.

The only circumstances in which the government will pay the refund directly to you is if you bought or built the property between July 19 2016 and December 31 2016.

If you buy a new build after January 1 2017, the refund is instead paid to the contractor. And, if you self-build the property after January 1 2017, the refund will be paid directly to your loan provider. In other words, you will not be able to use the rebate as funds to refurbish or improve your new home.

Jumping through hoops 

There are also a number of hoops any applicant will have to jump through in order to qualify – this includes filing a tax return for each year you are looking to claim a refund and being tax compliant.

To qualify for HTB there are a number of boxes you’ll need to tick. For starters, you must:

  • Be a first-time buyer (should you be buying or building the new property with other people, they must also be first-time buyers to avail of HTB).
  • Buy or build a new property between July 19 2016 and December 31 2019.
  • Live in the property as your main home for five years after you buy or build it.
  • Be tax compliant and complete a tax return (if you are self-assessed you must also have tax clearance).
  • If purchasing from a contractor, choose one who is approved by Revenue.
  • Take out your mortgage (at least 70% of the purchase value of the property) with a qualifying lender. Cash buyers do not qualify.

If you are buying the property, you must have signed a contract to buy that property on or after July 19 2016. And, if you are self-building, you must have drawn down the first part of the mortgage on or after that date.

Being fully tax compliant

Being fully tax compliant is vital in order to qualify for HTB. You’ll need to be all square with Revenue for at least the four years immediately prior to your HTB claim. You will also have to file a Form 12 (PAYE taxpayers) or Form 11 (self-assessed) for each of the four years and you must pay any outstanding taxes that are due.

It’s important to note that, if you receive a HTB refund, and you do not tick the above boxes (for example, you don’t live in the property for the period of 5 years), Revenue are entitled to reclaim the refund in future.

Before you apply, you must register with Revenue and complete a tax return for each year you are seeking a tax rebate. In order to register with Revenue, you will need your PPS number, date of birth, phone number, email and home addresses.

If you are a first time buyer and you want to apply for HTB you can contact Revenue to get the ball rolling. Although, it may be wise to do so as soon as possible.

Barry Flanagan is Senior Tax Manager at www.taxback.com.

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About the author:

Barry Flanagan  / Tax Director, Taxback.com

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