Analysis: all you need to know about the Local Property Tax scheme ahead of the November deadlines for new valuations

Although residential property tax systems differ around the world, the common design features are the tax base (including exemptions and deferrals), liability, assessment, tax rate, and collection/payment. With the November 1st valuation date and the LPT return deadline of November 7th fast approaching, here's all you need to know about how it works and the changes ahead.

Who pays this tax?

The best two sources for the definition of the LPT tax base are the Finance (Local Property Tax) Act 2012 and the Revenue Commissioners. In essence, residential properties suitable for use as a dwelling (occupied or unoccupied) are subject to LPT. Certain properties were and continue to be exempt from the LPT, including properties unoccupied for an extended period by an ill or infirm liable person, or properties affected by pyrite or mica.

However, previous exemptions, such as new or unused property purchased from a builder or developer between 2013 and 2021, or properties in unfinished housing estates, will no longer apply and will be liable for LPT in 2022 and thereafter. The biggest change here is the inclusion of new properties that were not assessed in May 2013 and remained out of the tax net since then. It is estimated that this amounts to over 100,000 properties.

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From RTÉ Radio 1's Today with Claire Byrne, Katie Clair from Revenue's LPT branch on new property tax valuations

As distinct from exemptions, deferrals apply under certain specified conditions (for example, income thresholds, personal insolvency, or hardship cases) but are subject to an interest charge on deferred amounts, reduced to 3% from the current 4%. However, taxpayers eligible for an exemption or a deferral must still apply for same, self-assess their property and submit their LPT return, and on time.

The liability for a residential property tax usually falls on the owner or the occupier. As it's a recurrent tax, it is an annual charge. In the case of the LPT, it is the owner of the residential property who is legally liable. Given the complexity involved in properties and ownership (for example, what happens in the case of joint owners, long-term leases, local authority housing, trusts?) a list of the categories of liable persons is available at revenue.ie.

How are properties assessed?

There are different assessment methodologies. The LPT is value-based as opposed to area-based and uses market or capital values rather than rental values. Given the urgency with which it was introduced - post the 2008 financial crisis, the EU/IMF programme of financial support and Troika bailout, and the need to broaden the tax base during the years of austerity - and the absence of an up-to-date cadastral or survey records in Ireland, a self-assessment approach was chosen, with valuation bands of €50K in width. The first assessment was done in May 2013 and was to last until 2016. Due to the political pressure of rising property prices and higher LPT liabilities, the decision to revalue was deferred on a number of occasions.

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From RTÉ Radio 1's News At One, analysis from RTE Economics Correspondent, Robert Shortt on the decision to review LPT valuations every four years

In June 2021, the government announced a number of reforms to the LPT, including a revaluation on November 1st this year. Taxpayers are required to value their properties for the purposes of the LPT, and the amount payable will apply for the next four years to 2025.

As for the value of a property, although Revenue will provide an estimated LPT liability (the so-called Notice of Estimate), liable persons are still required to value their property. They can do so by using a number of different valuation sources or guides, including Revenue's online interactive valuation guide, the Residential Property Price Register, the use of a professional valuer, local real estate agents, or commercial property sales websites such as daft.ie or myhome.ie.

Once the taxpayer submits the valuation, Revenue’s estimated liability will be replaced by the self-assessed property valuation and the respective LPT charge. Where there is a difference between the two estimates, and in particular where the self-assessed amount is below the estimated amount payable, Revenue has stated that it will not contest cases where the difference is only one valuation band.

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From RTÉ Radio 1's Morning Ireland, changes to the Local Property Tax mean more home owners are set to pay Local Property Tax

Failure to submit a LPT return or the submission of an undervaluation may be subject to a penalty of €1,000 or a challenge by Revenue. At the same time, Revenue will pursue the estimated LPT liability amount using the available collection and enforcement options. In addition to the requirement to submit the LPT return by November 7th, taxpayers are also required to pay or make arrangements to pay the LPT for 2022. These details are outlined in the correspondence from Revenue to liable persons, sent by post or online via myAccount or ROS.

What is the tax rate?

The tax rate is set by central government and was initially 0.18% for properties up to a value of €1m, with a higher rate of 0.25% levied on more valuable properties. The so-called 'mansion’ tax, this latter rate applies to the portion of the value above €1m.

Given the increase in property prices and the inevitable rise in LPT liabilities, the government has widened the valuation bands (to €87.5K in most cases) and reduced the lower rate (to 0.1029%, with the higher rates of 0.25% and 0.3%). The majority of taxpayers will see no change in their LPT liability so the tax take from the LPT will remain close to the current yield (€560m versus €492m respectively).

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From RTÉ Radio 1's News At One, RTÉ Political Correspondent Mícheál Lehane on how LPT scheme changes mean the tax will now apply to homes built since 2013

Local authorities will still have the power to vary the basic rate up or down by 15% annually. In future, local authorities will retain 100% of the LPT collected in their administrative area. The new valuation bands and the respective LPT charge are available here.

Who collects the tax?

Originally, the precursor to the LPT was the annual household charge and this was administered by the Local Government Management Agency (LGMA) on behalf of local authorities. After some disquiet, Revenue was given the task to administer, collect and enforce the LPT. Collection rates in 2020 were 96%.

Revenue will continue to collect the LPT, and offer multiple payment options. These include a single payment using a debit card, credit card, cash or cheque; phased payments/instalments (monthly direct debit or via an approved Payment Service Provider such as An Post) or deduction at source (from salary/occupational pension/government Department).

For more specific details on the LPT and taxpayers’ obligations, namely Assess, Submit, and Pay (or ASAP as it may help to remember!) check out the relevant sections on the Citizens Information or Revenue websites.


The views expressed here are those of the author and do not represent or reflect the views of RTÉ