Property tax will be reviewed every four years under overhaul

Minister for Finance Paschal Donohoe speaking to media outside Government Buildings, following the publication of the Heads of the Finance (Local Property Tax) (Amendment) Bill 2021 which was approved by Government at the Cabinet meeting yesterday. Picture: Sam Boal/RollingNews.ie

Local Property Tax (LPT) will be reviewed every four years under an overhauled system which also brings newly-built homes into the net.

People will be asked to value their own homes under the adjusted property tax system which will be based on "fairness" and "affordability", Finance Minister Paschal Donohoe has said.

Wealthy local authority areas will be allowed keep all funds collected from the taxes under the reworked system meaning funding from central Government will have to be allocated to make up the deficit across other councils.

Local Property Tax Changes.

Up until now 80% of the LPT has been retained locally to fund vital public services, with the remaining 20% re-distributed to provide additional funding to certain local authorities that have lower property tax bases due to the variance in property values across the State.

"It is going to take a year to bed in the implementation of the new structure and rate," said Mr Donohoe.

"Across 2023 to 2024 we want to move to a situation where taxes that are raised within a particular local authority are kept within that local authority, but we will also make changes to ensure that no local authorities are worse off as a result of that change happening," the minister said.

Mr Donohoe said the "majority" of home owners will see a decrease or no change in the amount they pay when the new rates are introduced in November. The current 20 bands will remain in place, but they will be widened and higher end properties of over €1m also face an increased charge.

"We have decided to both cut the rate of the tax and widen the bands to make the changes affordable," said Mr Donohoe.

Where increases arise, the majority will be a single band of €90, notwithstanding the significant increases we have seen in property values since 2013.

Properties, including those that have so far been exempt as they were built since 2013, will be taxed based on a valuation of the home on November 1 this year.

New residential properties built after November of this year will be retrospectively valued as if they had existed until the next review is carried out in four years time.

Equitable method

Mr Donohoe said this would maximise the local property tax base and ensure equity.

"There are up to 100,000 homes that are not currently paying local property tax, and I believe it's very important that all houses, all apartments, all properties in our country, regardless of when they were built are taxed in the same way," he said.

The revised method for calculating local property tax Band 1 will be expanded up to €200,000 and band 2 will contains homes valued in the range of €200,000 to €262,500. The LPT charge is fixed at the current charge for bands 1 and 2, which is €90 and €225, respectively.

Mr Donohoe said: "Under the proposed methodology, it was likely that owners of higher value properties could benefit from reductions in LPT liabilities due to the widening of the bands and the reduced rate.

"To address this, we propose that a higher rate should be applied to properties above €1.05 million by charging a higher mid-point rate on bands above that level and a third rate be applied to properties above €1.75 million," he said.