Personal Finance guide

Your guide to the local property tax

Your guide to the local property tax
Daragh Cassidy

Daragh Cassidy

Head Writer

Since its introduction the local property tax has almost been as unpopular as water charges. However it looks set to stay and important changes have recently been announced by the Government.

Background to the local property tax

The local property tax (LPT) was first introduced back in 2013 to help broaden the tax base and leave the Government less dependent on income tax in particular. 

Property tax is paid by homeowners in the vast majority of other European countries and it was hoped the tax could be used to fund local services better.    

Property tax is often considered a form of wealth tax and many economists think it is better and fairer to raise this tax as opposed to income tax as by doing the latter you can create a disincentive to work.

However some political parties in Ireland such as Sinn Féin currently want to abolish it. 

There are currently a few opt outs from the tax, such as anyone who bought a new build home since 2013 and those who bought in 'ghost' or unfinished housing estates.

But in general, anyone who owns a property must pay property tax on a yearly basis.

The more your home is worth, the more you’ll pay. 

How much is the local property tax? 

For properties up to €1 million, the tax is currently 0.18% of a property’s value as at 1st May 2013 (within a certain band). For properties costing more, 0.25% is levied on the portion of the value above €1 million.

So let's say your house was valued at €265,000 in May 2013, you're in band 5 and will pay €495 a year.

The tax is self-assessed - meaning you tell Revenue how much you think your home is worth. 

Valuation band number

Valuation band 

Yearly tax

1

€0 - €100,000

€90

2

€100,001 - €150,000

€225

3

€150,001 - €200,000

€315

4

€200,001 - €250,000

€405

5

€250,001 - €300,000

€495

6

€300,001 - €350,000

€585

7

€350,001 - €400,000

€675

8

€400,001 - €450,000

€765

9

€450,001 - €500,000

€855

10

€500,001 - €550,000

€945

11

€550,001 - €600,000

€1,035

12

€600,001 - €650,000

€1,125

13

€650,001 - €700,000

€1,215

14

€700,001 - €750,000

€1,305

15

€750,001 - €800,000

€1,395

16

€800,001 - €850,000

€1,485

17

€850,001 - €900,000

€1,575

18

€900,001 - €950,000

€1,665

19

€950,001 - €1,000,000

€1,755

Your local authority can vote to increase or decrease the LPT rate by up to 15% from the base rate. This is referred to as the Local Adjustment Factor (LAF). So the rate you’re currently paying could be up to 15% more or less than the amount shown above.

When the LPT was first introduced, many councils voted to reduce the tax by the maximum of 15% given how unpopular it was. However this has begun to change in recent years as hard-pressed local councils seek more funding. 

However Dublin City Council recently voted against making any changes and it still applies the maximum 15% discount.  

Local authority rate discounts 

Here's a look at how some of the main councils nationwide have chosen to apply a LAF.  

Local authority area

Discount applied 

Dublin City Council

-15%

Fingal County Council

-10%

Dun Laoghaire Rathdown County Council

Nil

South Dublin County Council

-15%

Cork City Council

+7.5%

Galway City Council

Nil

Sligo County Council

+15%

Limerick City & County Council

+15%


Waterford City & County Council

+10%

Reviews and controversies 

Initially the LPT was supposed to be reviewed every three years with payments based on fairly up-to-date property values. But coming up to the first review in 2016 house prices had shot up in the meantime meaning most people would have seen a huge increase in their tax liability. Not good for getting votes! 

So in 2015 the then minister for finance Michael Noonan decided to postpone the 2016 revaluation until November 2019. A working group was also set up to review how the tax should work going forward.

However any changes to the LPT were always going to be controversial as some changes would see people paying more each year and others the same or slightly less. 

So the report was largely ignored and in recent years the new Minister for Finance, Paschal Donohoe, has also twice deferred making any changes. 

However in June 2021 a plan for the reform of the tax was finally brought before cabinet...

New changes 

The biggest change is that from next year around 100,000 homes that were built from 2013 onwards will now be liable for the tax. 

Those living in ghost estates will no longer be exempt either.

An up-to-date valuation will also be used - currently suggested as being the price of your property as of November 2021.

However the rate bands will also be widened and the charge reduced from 0.18% to (a rather specific) 0.1029% on homes up to €1.05 million so that people's bills don't skyrocket. This is because property prices are now about 80% to 90% higher than May 2013.

According to an analysis by the Department of Finance, around 53% of homeowners should not end up paying any more than they currently do, while 11% will see a decrease. However, in addition to the homes built after 2013 being brought into the net, an estimated 36% of homeowners will see an increase in their charge.

However you must also be mindful of the LAF - this could be raised by your local council meaning you could pay even more.

Another change going forward is that all the LPT raised by a local authority area will stay within that area. At the moment, up to 20% of a local authority’s tax can be taken to pay for services in less affluent or more rural areas. However some Dublin councillors have claimed that far more has been taken from the Dublin City Council budget in recent years.

What are the proposed new rates?

Properties up to €1.05m will be charged 0.1029% (within a band).

Properties above this will be charged 0.1029% on the first €1.05m, 0.25% on any balance up to €1.75m, and 0.3% on any balance above this amount.

Proposed valuation band number Valuation band Tax
1 €0 - €200,000 €90
2 €200,001 - €262,500 €225
3 €262,501 - €350,000 €315
4 €350,001 - €437,500 €405
5 €437,501 - €525,000 €495
6 €525,001 - €612,500 €585
7 €612,501 - €700,000 €675
8 €700,001 - €787,500 €765
9 €787,501 - €875,000 €855
10 €875,001 - €962,500 €945
11 €962,501 - €1,050,000 €1,035
12 €1,050,001 - €1,137,500 €1,190
13 €1,137,501 - €1,225,000 €1,409
14 €1,225,001 - €1,312,000 €1,627
15 €1,312,001 - €1,400,000 €1,846
16 €1,400,001 - €1,487,500 €2,065
17 €1,487,501 - €1,575,000 €2,284
18 €1,575,001 - €1,662,500 €2,502
19 €1,662,501 - €1,750,000 €2,721

How much does the property tax raise?

The tax currently raises around €480 million a year. 

It’s estimated the new changes will raise around another €80 million or so a year. 

Dublin City Council is where the most local property tax is collected at around €70 million a year.

It is followed by Dun Laoghaire-Rathdown on €44 million and Cork County Council on €39 million.

However, as mentioned above, not all this money may actually be given to these councils as some can be redistributed elsewhere. 

Where does the money go?

Well, that's a good question.

The tax was supposed to fund local services better. Think more bins, public toilets, more frequent street cleaning, nicer lighting, more public seating, better maintenance of roads and pavements and investment in things like local libraries and swimming pools.

Before the tax, central government gave local authorities a subvention each year, which along with business rates and car parking charges largely funded local councils.

However funding from central government was hugely reduced once the property tax was introduced so councils were in many cases no better off.

And as mentioned above, some councils like Dublin City Council even had some of its LPT revenues given to other local authority areas.  

So the result has been homeowners paying more but often seeing far less in the way of local services. 

What if I pay management charges?

Management charges are used to pay for the upkeep of your apartment complex so have nothing to do with the property tax.

However in recent years some new build housing estates have been subject to them too in order to pay for services which in the past would have been done by local councils.

It's been argued therefore that those who pay management charges should receive some type of discount on their property tax but for now nothing has been agreed by the Government.

What if I can't pay?

If you're single and earn less than €18,000 a year or a couple who earn less than €30,000 you can fully defer paying your property tax. These limits were previously €15,000 and €25,000 respectively.

These limits are for people who have fully repaid their mortgage and are now mortgage free. A slightly higher income threshold is allowed for deferral if you're still paying a mortgage. 

However in all cases you will be charged interest on the amount owed and must pay it eventually.  

If you die before you've repaid any tax due, it will be taken from your estate. 

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