THE Minister for Finance has warned that “every property owner” will be asked to pay “at least a small amount more” in tax from next year.
The majority of households will be forced to fork up between €25 and €5 more for Local Property Tax every year under the rule change.
Revaluations of properties are due to take place on November 1, with the next valuation starting up in 2025 for a duration of five years.
Minister for Finance Paschal Donohoe said: “The valuation bands will be widened in line with property price growth that we have seen in recent years, and the base rate of local property tax will be amended.
“The widening of the bands will ensure most property owners will remain in the valuation band that they are currently in.”
The price of property has risen by 23 per cent since the last local property tax valuation period in 2021, according to the Central Statistics Office.
This enormous jump in property prices would mean that almost 70 per cent of homes would climb at least one tax band and face significantly increased payments.
For example, a property valued at €400,000 in 2021 was in Value Band Four which is a basic rate of €405 per year.
This same property would now be worth €492,000 and would jump into Value Band 5 with a tax rate of €495 per year – a €90 increase.
The proposed changes to LPT will mean that most homeowners will remain in their present valuation bands – but base LPT charges will be hiked in proportion to property values.
With these changes in place, some 97 per cent of properties are expected to stay within the same band.
The remaining three per cent of properties will climb just one tax band.
A small number of properties will pay a much larger amount than before, either as a result of moving valuation band, or due to their existing high value.
However, the “majority” of people, those with properties valued at €525,000 or lower, will pay between €5 and €25 more for LPT each year.
Minister Donohoe said: “Given the growth in property prices in recent years, the proposed changes are fair, progressive, and will ensure consistency and stability in the upcoming valuation period.”
“By asking property owners to contribute a small amount more than they do at present, LPT is projected to yield in the realm of €45 million or eight per cent in additional funding for local authorities, which will go towards local services.
“The majority of property owners, being those with properties valued at €525,000 or lower on 1 November 2025, will pay between €5 and €25 extra a year.”
HOW DOES IT WORK?
ALL valuation bands will be widened by 20 per cent under the new rules.
Band 1 is expanded from €1 to €240,000 and Band 2 contains values in the range €240,000 to €315,000.
All subsequent bands increase in increments of €105,000.
The fixed charges for Bands 1 and 2 will be increased: from €90 to €95 for Band 1, and from €225 to €235 for Band 2.
The basic rate of LPT is to be decreased from 0.1029 per cent to 0.0906 per cent, which will apply on properties valued up to €1.26 million.
This will result in a small increase in base LPT charges, as midpoints increase as a result of band widening.
For properties in Bands 3-19, charges are calculated by applying the base rate of 0.0906 per cent to the band’s midpoint value.
Properties in Bands 12-19, between €1.26 million and €2.1 million, are charged at 0.0906 per cent on the first €1.26 million, with a subsequent 0.25 per cent on the balance of midpoint value in excess of €1.26 million.
Properties in Band 20 (over €2.1 million) are charged on actual property values as before,
The Fine Gael TD said the Programme for Government commits to “fairness stability” in LPT payments, explaining that the new charging mechanism will prevent “a significant increase in liabilities for most households”.
Minister Donohoe intends to have the Bill enacted before the summer recess to enable the Revenue Commissioners to make the necessary preparations in advance of the valuation date.
He said: “The next step is to prepare the legislation to implement these changes to allow Revenue make the necessary preparations for the valuation of residential properties and the introduction of the new charging structure.”
The income thresholds for deferral of LPT will be adjusted to account for inflation, wage growth and increases in State payments since 2021.
This decision follows a recommendation made by the 2019 Review Group on LPT.
The existing thresholds will increase by between 30 per cent and 40 per cent, depending on personal status and whether the threshold is in respect of full or partial deferral.
