On 2 June 2021, Finance Minister Paschal Donohoe confirmed the details of the Local Property Tax (LPT) changes. Once the changes go into effect on 1 November, the government estimates that just over a third (36 percent) of property owners will see an increase on their bill, just over half (53 percent) will see no change at all, and 11 percent will see their tax payments reduced.
First off, what is the Local Property Tax? The Local Property Tax was introduced in 2013, and it is an annual charge on all residential properties in the State. Basically, if you own a residential property, you will have to pay this tax. The charges are currently based on self-assessed valuations carried out in 2013. The amount you pay is based on the valuation of your property, and there are 20 different LPT bands, with the lowest two having fixed rate charges of €90 and €225. The problem with these valuations is that property prices have surged since 2013, while the valuations of property for LPT purposes have not changed since 1 May 2013. These valuations were originally intended to be re evaluated every three years, but the government has postponed the reevaluation three separate times, first in 2016, then in 2019, and again in 2020. The new proposed changes will see properties be revalued on 1 November 2021, and subsequently every four years after that.
While property values have indeed surged wildly since 2013, this does not mean that your LPT payment will increase wildly as well. However, the government has also included in its latest proposal provisions to account for this increase in property prices. After the reforms are put into place, the number of bands will remain at 20, but their limits have been increased dramatically, and the bands themselves have been widened by 75%. For example, band 10, which was previously between €500,001 – €550,000 has been changed and is now between €875,001 – €962,500. The rest of the bands have also been changed, and a list of them can be found here.
So is your Local Property Tax going to increase or decrease? While that obviously depends on the value of your property, and the amount of your payment may increase, the annual effective rate of the LPT has been cut across most bands from 0.18% to 0.1029%. This means that for most homeowners, the value of their property, on which the LPT is calculated, has increased, the percentage of this valuation taken as tax is actually decreasing. The lower two bands have been widened in proportion with the other eighteen, but their flat rate payments remain at €90 and €225, respectively. If your home was built between 2013 and now, you may have been exempt from the LPT, but you are out of luck, as your home will now be included.
While it is currently unclear who will luck out and who will be stuck paying more in taxes, as this varies and depends on how property values have behaved in different regions over time, the government will be expecting to take in approximately €80 million more from the LPT than last year.
