With the continued increase in house prices over the past number of years there has been renewed focus on how this will affect the annual bill faced every year by home owners for Local Property Tax (‘LPT’). This is particularly the case when a potential increase in the annual bill is on the horizon later in the year.
At the moment, Local Property Tax liability is calculated by reference to the value of a property as of 1 May 2013. The higher the valuation of the property at this date, the higher the LPT bill will be.
Originally, this valuation was due to be updated on 1 November 2016 but the Government delayed this date to 1 November 2019. For the majority of homeowners, their property value has increased significantly since May 2013. This meant that many homeowners were facing a substantially increased Local Property Tax bill following the scheduled valuation later this year.
The Government has decided to defer the valuation date for LPT to 1 November 2020 which no doubt has been welcomed by all property owners. The deferral of the LPT valuation date is on foot of a review that Minister Paschal Donohue initiated of LPT in 2018. The Minister stressed that “any increase [to LPT] should be modest and affordable and of course fair”. This will provide some comfort to homeowners that the Government does not intend to penalise them due to the improved housing market. It is unlikely that the Government will make a decision prior to the next election and any new Government may of course have a different policy. Homeowners should be aware that, while they should welcome the extension of the valuation date, unless reforms are commenced or further deferrals occur, they may be facing an increased LPT bill from November 2021.
The increase in property prices has led to some practical issues arising for anyone planning on selling a residential property. For example, based on current guidelines, in Dublin, if the sale price of your property is more than 80% of your May 2013 valuation, then you must apply to the Revenue Commissioners to approve the valuation before the sale can complete. Outside of Dublin, the threshold is 50%. Revenue must be provided with evidence which satisfies them that your valuation in May 2013 was reasonable.
Rather than go through the Revenue approval process, which can take some time, many sellers have decided to increase the declared valuation of their property so that it falls within the Revenue threshold. This leads to them needing to pay increased bills for the years 2013-2019 based on their new valuation.
For anyone who is not selling their property, the good news is that we can forget about an increased LPT bill for another year and look instead to what may happen in November 2020.
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About the Authors
Jackie is Head of the Property team at Hayes solicitors. She is a highly experienced adviser to clients in the banking, public and retail sectors on all aspects of the sale, purchase, leasing, development and financing of properties. She has extensive experience of advising landlords and tenants in insolvency situations and has advised in recent high profile examinerships.
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.