Local Property Tax – Your Ultimate Guide

Why Did the Government Introduce the LPT?

One of the terms of the 2010 EU/IMF bailout agreed with the then Fianna Fail government was the introduction of a property tax. The rationale was that one of the many reasons for the boom and ultimate bust of the Irish economy was our over reliance on one-off, transactional taxes such as stamp duty and capital gains. When the transactions dried up as the economy started to slow, so did these transitory tax receipts and the country’s finances were badly exposed. The attraction of a property tax, versus stamp duty for example, is that it must be paid every year regardless of the prevailing economic conditions and is paid by those who can afford it i.e. asset owners. It gives the government a steady, recession-proof, smooth income stream versus the more erratic, lumpy, pro-cyclical income associated with transaction taxes; these transaction taxes contract dramatically precisely when the state needs them i.e. during a downturn.

Do All Residential Property Owners Have to Pay LPT or Are There Exemptions?

There are exemptions to the LPT.

  • Properties purchased in 2013
    So long as the property continues to be used as the buyer’s sole or main residence, the exemption remains in place. This cohort of property owners will be liable for LPT from 2021 onward as the next valuation date is scheduled for 1 November 2020, having been delayed a number of times, presumably for political expediency.
  • Properties that were self-built between January 1 and May 2013
    This exemption remains in place so long as the property remains the owner’s sole or main residence; the exemption ceases to apply if the property is sold ie the new owner will be liable for LPT. These property owners will be liable for LPT from 2021.
  • Properties that were self-built after May 1 and before 1 November 2019
    This exemption remains in place for the property until 2021 even if sold.
  • New & previously unused properties purchased from a builder between Jan 1 2013 and October 2020
    These properties remain exempt until 2021 even if sold during this period.

For a full list of exemptions, see https://www.citizensinformation.ie/en/money_and_tax/tax/housing_taxes_and_reliefs/local_property_tax_exemptions.html

How Do I Pay the LPT?

The Revenue is responsible for the collection of the LPT. They offer a range of payment mechanisms including the option to pay in instalments over the course of the year. The options are listed below with further information available at the Revenue website here:

Options for making phased payments over the year include:

  • Deduction at source from your salary or occupational pension
  • Deduction at source from certain payments received from the Department of Employment Affairs and Social Protection (DEASP)
  • Deduction at source from scheme payments received from the Department of Agriculture, Food and the Marine
  • Direct debit
  • Cash payments (including debit or credit card) through approved payment service providers

Options for paying in full in a single payment:

  • Annual debit instruction
  • Debit or credit card
  • Cash payments (including debit or credit) through approved payment service providers
  • Cheque

What are the Criticisms of the LPT?

One of the major criticisms of the LPT is that it penalises, often elderly, asset rich, cash poor citizens. For example, retired empty-nesters on modest pensions may be liable for large LPT bills as their family home has increased in value over the years. However, the income of the retirees does not rise commensurately each year and so they can be put under pressure to pay a tax based on their ownership of a valuable asset, that they never intend to sell. One could argue that this tax offers an incentive to retirees to downsize to avail of a lower LPT instead of living in a largely empty property that incurs a substantial annual LPT liability.

The government has continually put off the next valuation date for LPT until after the next general election. The reason is that 2013 marked the approximate bottom of the cycle in terms of house prices in Ireland. Many properties have doubled in value since then so property owners, when forced to revalue to today’s levels, will be in for a nasty surprise and presumably will be furious with the government in the context of many of these homeowners already paying over 50% marginal income tax. As of now, the next valuation date is set for 1 November 2020 with that liability having to be discharged over the course of 2021.