Local Property Tax

On 2 June 2021, the Minister for Finance, Paschal Donohoe T.D., announced changes to the Local Property Tax (LPT). The proposed changes included a reduction in the rate of the tax, widening of the bands and the removal of the exemption for properties built since 2013. The changes are projected to deliver a yield of €560 million.

As a result of the proposed changes, it is expected that: 3% of residential property owners will incur a higher LPT charge by over €100 (an increase of two bands); 33% of residential property owners will incur a higher LPT charge by up to €100 (an increase of one band); there will be no change to the LPT charge for 53% of residential property owners and 11% will see a decrease in their LPT charge.

The proposed changes to the LPT were legislated for in the Finance (Local Property Tax) (Amendment) Act 2021, which was signed by the President of Ireland, Michael D. Higgins on 22 July 2021.

The legislation provides for property valuations to be reviewed every four years, which will facilitate the regular addition of new properties into the LPT. All new properties built between valuation dates will be retrospectively valued as if they had existed on the preceding valuation date and become liable on the next liability date of 1 November.

Since the announcement of the proposed changes to LPT, Revenue has been making the essential technical and administrative preparations in advance of the valuation date of 1 November 2021. On 17 September 2021, Revenue launched its communication campaign in relation to LPT for 2022, contacting 1.4 million residential property owners over the following weeks to advise them of what they need to do to comply with their LPT obligations for 2022 and to draw attention to the resources available to assist taxpayers, including an online valuation tool.

On this webpage we have outlined the background to the LPT, the changes to the LPT system and the new basis for calculating LPT liabilities, and information resources published by Revenue.

Background to LPT

The LPT was introduced in 2013 to provide a stable funding base for local authorities and to deliver significant structural reform by broadening the tax base in a manner that did not directly impact on employment.

On its introduction, LPT was calculated based on the value of the property on 1 May 2013 with property values organised into valuation bands from €0 to €1 million and a LPT rate assigned to each band ranging from €90 to €1,755. No bands applied to property values over €1 million, instead, an actual valuation for the property was required. LPT was then calculated at 0.18% on the first €1 million in value and 0.25% on the portion of the value above €1 million.

From 2015 onwards, Local Authorities could vary the LPT base rate on residential properties. The base rate is the rate as applied in 2014. The Local Authority could increase or decrease the rate by up to 15% from the base rate (the ‘Local Adjustment Factor’ (LAF). Revenue provide an online calculator to assist property owners to calculate their LPT charge.

When LPT was introduced in 2013, the next valuation date was set for 1 November 2016. Following a review of the regime in 2015, it was decided to postpone the revaluation date to 1 November 2019.  The Review of Local Property Tax: The report of the Interdepartmental Group – March 2019 (2019 LPT Review), was undertaken by the Minister for Finance in advance of the revaluation date on 1 November 2019. The 2019 LPT Review sought to reform the regime to achieve relative stability in payments for homeowners given the substantial increase in property prices since the introduction of the LPT in 2013.

It was decided to further defer the revaluation date to 1 November 2020 to allow the Oireachtas Committee on Budgetary Oversight to consider the 2019 LPT Review and issue its scrutiny report in September 2019.

The Programme for Government published in June 2020 committed to bring forward legislation for the LPT to ensure that most homeowners will face no increase, bring new homes into the LPT regime and allow all money collected locally to be retained within the county.

In 2020, the revaluation date was once again deferred to 1 November 2021 given the impact of the COVID-19 pandemic on the planned reform of the regime.

New Basis for Calculating LPT

The 2019 LPT Review analysed five scenarios broadly based on a €500 million target yield (excluding any LAF). The proposed new basis for calculating LPT liabilities builds on the existing band structure, maintaining the number of bands at 20. The bands structure applying to residential property prior to 1 November 2021 (which determined the LPT charge up to 2021) and the new band structure applying from 1 November 2021 which determine the LPT charge for 2022 to 2025 are detailed below.

Properties in Band 20 are charged on the individual property values as before. The actual value is assessed at 0.1029% on the first €1.05 million, 0.25% between €1.05 million and €1.75 million, and 0.3% on the balance.

New LPT Band Structure

Valuation on 1 November 2021

The new self-assessed valuation on 1 November 2021 will determine the LPT charge to be paid each year for the next 4 years (from 2022 to 2025). Revenue has released an interactive valuation tool to help property owners to self-assess the value of their property, by providing an estimated average valuation band for residential properties in each area in a map format.

Property owners can use an address or Eircode to find their location and the related estimated average valuation band. Revenue has also published guidance on other information sources in determining market value on a Valuing your property as at 1 November 2021 webpage.

When accessing the online valuation tool, users are presented with a self-assessment message reminding them that the tool is a guide only and it may not reflect their property’s value. Property owners should consider the specifics of their property in comparison to other properties in their area – it may have unique features to be taken into account. Revenue has the right to request further information on the self-assessed valuation, even if it is in line with the average valuation band for their area. Property owners are advised to keep a copy of information sources and supporting documentation used to determine the market value.

A residential property that is not currently registered with Revenue for LPT, for example, because the owner built their property in the period since 2013, should now be registered as such properties will become liable for LPT for the next valuation period from 2022 to 2025, as long as it is a residential property on 1 November 2021.

Exemptions and Deferrals

The changes to the LPT regime include the removal of the exemption for first-time buyers who purchased property between 1 January 2013 and 31 December 2013 and homes in ‘Ghost estates’ from the charge to LPT and to phase out the temporary exemption in respect of pyrite damaged properties in certain eastern counties and Limerick.

A temporary exemption from LPT has been provided for homeowners affected by pyrite and mica in counties Donegal and Mayo, whose homes have been damaged due to the use of defective concrete blocks in their construction and are eligible for the Defective Concrete Blocks Grant Scheme.

The changes also allow a property that has been vacated by a liable person due to long term mental or physical infirmity to be occupied by another person, who is not a liable person in relation to the property, without losing the exemption. Prior to these changes properties vacated by their owners due to illness could be exempt from LPT only where the property was not occupied by another person

The income thresholds for LPT deferrals were increased to €18,000 (from €15,000) for a single owner and €30,000 for a couple (from €25,000) as recommended by the 2019 LPT Review Group.

The rate of interest on deferred LPT was reduced from 4% to 3% from 1 January 2022.

At the end of September 2021, Revenue published a suite of updated and new LPT Tax and Duty Manuals on exemptions and reliefs.