The Local Property Tax (LPT) was initially introduced in 2013 with the aim of providing stable local authority funding while broadening the tax base. The amount payable by property owners has ever since been calculated based on an initial valuation of their property at 1st May 2013. The next valuation date was originally scheduled for November 2016, but this date has been repeatedly delayed by successive governments due to a number of political considerations including the substantial increase in property prices since 2013.
The Programme for Government 2020 made a commitment to reform the current LPT in a way that did not unfairly penalize property owners for the increase in the value of their homes since 2013. Minister for Finance Paschal Donohoe announced on 3rd June 2021 that changes to the current LPT regime would be legislated for in the Finance (Local Property Tax) (Amendment) Bill 2021. Under the proposals:
1. Valuation bands will be widened to ensure a majority of homeowners will face no increase to their LPT bill
The amount of LPT you pay is calculated by the valuation band your property is placed into. Valuation bands have been widened meaning valuation bands will now increase every €87,500 for valuations above €262,500 instead of every €50,000 as had previously been the case.
By way of example of how this widening of the valuation bands will work, a house in Dublin which was valued at €400,000 in 2013 that is revalued at €652,000 will remain in valuation band 7 meaning the property owner should see no increase in their LPT.
A house worth €690,000 in the past but whose valuation now stands at €950,000 will move down 3 valuation bands meaning the property owner should see a decrease in their LPT.
2. Property valuations will be reviewed every four years.
It has been over 8 years since the last valuation of properties for LPT. Valuations had been due to take place every three years but have been consistently deferred. Under the proposals, valuations will now take place every 4 years.
3. New Build Properties will be incorporated into the system every four years
All new houses built since 2013 have been exempt from paying LPT. Under the proposals, all of these properties will now be valued and subject to LPT.
At every new valuation date, all new build properties built since the previous valuation date will be valued retrospectively, as if they had existed at the previous valuation date and be subject to LPT from the new valuation date.
4. Local authorities are set to retain the entirety of the proceeds from the tax.
This means the LPT that property owners pay will go directly into services in their local areas.
The revenue from the LPT is projected to increase from €480 million to €560 million next year following the implementation of the proposals.
The government forecasts that as a result of the proposed changes:
- 53% of property owners can expect no change to their yearly LPT bill.
- 33% of property owners should expect their yearly LPT bill to increase by no more than €100.
- 11% of property owners can expect their yearly LPT bill to decrease.
- 3% of property owners can expect their yearly LPT bill to increase by more than €100 .
Previously, a number of exemptions from LPT were in place and under the new proposals the exemptions are being narrowed significantly. Exemptions for first time buyers who purchased property between 1 January 2013 and 31 December 2013 and homes in ‘Ghost Estates’ will be removed and a temporary exemption in respect of pyrite damaged properties in the east and Limerick will be phased out.
Exemptions will remain for pyrite and mica affected homeowners in Donegal and Mayo and for houses rented out by owners who have vacated the property due to illness.
Overall, the new proposals appear on their face to have achieved their aim of being fair. If the bands had not been widened as they have been, many property owners would have faced large increases whereas under the proposals, only 3% of property owners face an increase of in excess of €100. The LPT has been a contentious issue in Irish politics for many years and property owners will likely welcome the fact that they will now have some certainty on LPT after decisions being deferred for so long. The proposals will now be placed on a legislative footing. We will keep you updated on any changes to the proposals between now the enactment of legislation.Back to Full News
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About the Author
Philip is an associate solicitor in the Property team at Hayes solicitors. He has a range of experience acting for clients in varied transactions including the purchase, sale, mortgaging and refinancing of both residential and commercial premises.