For all the fury it triggers, Ireland’s local property tax regime is remarkably unambitious. The tax, introduced in 2013 and designed to help fund local services, raises less than half of 1 per cent of all tax revenues.
Going back to the local rates that we inherited from the British, Ireland has a history of designing or administering property tax structures so as to make them unworkable or meaningless.
The local property tax we currently rail against was only introduced under instruction from the Troika who took over management of the economy after the financial crash as a measure to widen the tax net.
Set initially at a modest 0.18 per cent annual levy on properties valued at up to €1 million and 0.25 per cent on any value above that, the tax has been self-assessed from the outset. For ease of reckoning, properties were grouped in one of 19 bands – the first up to €100,000 and then a new band for every €50,000 above that.
As originally designed, the plan was for properties to be revalued every four years to take account of changes in the property market. In the event, politicians kept moving the goalposts for fear that a revaluation at a time of rising prices would lead to greater political unrest over the tax.
When, in 2021, after eight years, a revaluation was finally conducted, the government of the day had found a very Irish solution to an Irish problem. To offset the rising property values, they widened the valuation bands and lowered the tax rate to ensure that annual bills remained more or less the same.
And that is what is happening again as another revaluation looms in November. Once again, the tax bands have been widened and the rate at which property is taxed cut – with the basic rate falling to 0.0906 per cent, just half the rate that applied up to 2022. While bills are likely to rise, projections by the Department of Finance suggest the tax will increase by 5-6 per cent for most people.
Making an LPT return
So what will you have to do?
Revenue will be sending out letters to households giving an indication of what it thinks their property is worth, but it is the responsibility of every homeowner to make their own assessment and file a Local Property Tax (LPT) return.
First, they need to assess what their home is worth on the valuation date – November 1st, 2025. There is no prescribed way of doing this but getting it wrong could complicate your life going forward.
The most obvious way to assess the property’s value is to get a formal valuation done by a professional valuer. However, this will cost you in excess of €100 and, in any case, given the number of properties, valuers could well find themselves stretched if everyone went that route.
For most people, especially those living in estates or in urban areas, a check with the Property Price Register will allow you to see what similar properties have sold for in the recent past.
If, as in our case, nothing has sold in the past year or two, you will also need to adjust the most recent price for a similar property to take account of rising prices in the meantime. The Central Statistics Office publishes a monthly residential property price index which can guide you in any such adjustment.
If there have been no recent sales at all in your area but there are properties on the market, that can also give you a guide to value. Most properties will sell for slightly over their asking price in the current market but, if you see something that has not moved at all, it may be that the price is being pitched too high.
Another way of assessing value is simply to adjust the valuation you put on the property back in November 2021 to take account of the increase in property prices in your area over the intervening four years by reference to the CSO data.
Or you can just rely on Revenue’s interactive valuation tool which indicates the average valuation band for properties in your area. However, if your home is bigger or smaller than the average in your location, you will need to adjust – Revenue advises that the interactive tool cannot provide a specific market value for any individual property.
Once you have a valuation, see which of the 19 bands it falls into and the associated tax charge. If it is in Bands 12 and above (valued at anywhere from €1.26 million to €2.1 million), LPT is assessed at 0.25 per cent on any value above the €1.26 million threshold, although that is provided for in the figures for your bill within each band.
If it is worth more than €2.1 million, you are required to provide a specific valuation, rather than one within a band. Any value above €2.1 million is taxed at 0.3 per cent.
And, of course, all that is before your local authority uses the discretion it has under the legislation to lower or increase the charge by up to 15 per cent. From 2027, the councils will be able to increase the charge by as much as 25 per cent.
The key thing is to document the approach you have taken and retain any material to back up the valuation you have decided upon – such as ads or brochures with the asking price for neighbouring properties on the market.
It is open to Revenue to challenge the valuation given and they can do that at any time over the next few years, not just when you file your return. Without a record, it may be difficult to recall precisely how you settled on an LPT valuation and impossible to source corroborating evidence.
Having sorted your valuation, you need to file an LPT return by November 7th. If you normally file tax returns online – either through Revenue’s myAccount portal or via ROS – you can submit your return in the same way. Otherwise, you can go through Revenue’s dedicated LPT online channel.
To complete the return, apart from your valuation, you will need the ID of your property and your LPT PIN. Both of these details will be on the letter Revenue is sending out to about 2 million households in the coming weeks.
You will also need your PPS number and details of how you intend to pay your annual LPT charge.
Revenue offers a wide range of payment methods. If you want to pay the charge as a lump sum, you can do so via your credit or debit card or through an annual debit instruction, under which the money will automatically be taken from your account at the same time every year.
For many people, stretched household finances mean that is neither practical nor preferable. Revenue also offers a series of instalment payment options and, unlike, say, your household or car insurance, you are not charged a premium for stretching the payments out across the year.
You can set up a monthly direct debt or permit Revenue to deduct the charge at source from your salary or pension. If none of those work for you, you can also pay in cash through An Post or Payzone.
You will need to indicate on your return which payment option you are going for unless it is the same as you have been using thus far.
Don’t ignore it
Ignoring the Revenue letter is not a smart idea.
The tax office will chase you up but if they don’t hear from you, ultimately they will take action to secure payment at the valuation they determine for your property.
They can get orders to automatically deduct the charge from your salary or pension and/or withhold a tax clearance certificate that you might need for any number of reasons, including access to certain housing incentives.
They can also offset the charge against any tax refund you hoped to get for medical or other reliefs and credits that you apply for in an annual tax return.
Worse still, they will charge interest on outstanding bills at 8 per cent per annum or impose a surcharge on any other tax return you make, for income tax or capital gains for instance.
In extremis, they can pass the debt on to the county sheriff for collection or go to court to get a notice of attachment to your bank account to take the money directly from there.
On a practical level, if you don’t pay the charge and are hoping to sell your house, the deal will be blocked by Revenue, which will not provide the necessary clearance until any LPT debt is settled.
That clearance might also be delayed if you end up selling the property between now and 2030 for a price significantly ahead of the valuation you give Revenue this November. Tax officials will certainly allow for increases over that time in line with property price rises in the market, but if you value your home at €350,000 and sell it in a couple of years for €700,000, you can certainly expect Revenue to come looking for back payment of LPT at a higher rate.
Revenue will allow deferral of payment – not an exemption – for people in certain categories. As you might expect, this includes people dealing with the estate of someone who has died, but also people whose income is below certain thresholds, those subject to personal insolvency arrangements or others who can appeal on hardship grounds.
If you are deferring payment, you will have interest applied to your account at a rate of 3 per cent for every year that the bill is outstanding.
The bill will ultimately become a charge against the property and it will have to be settled before the home is sold or transferred to another person.
No one wants to pay more tax than they need to and there is always the temptation with self-assessed taxes to either ignore them or “low ball” them. Given Revenue’s powers under the Local Property Tax legislation, neither is a sensible option. The bill will fall due eventually, when you sell the house if not before. And, if Revenue thinks you’re undervaluing the home, they will simply impose their valuation.
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.