The Local Property Tax (LPT) Lowdown & What Increases or Decreases Means for You
The recent decision by Dublin City Council to reduce Local Property Tax (LPT) by 15% has stirred criticisms in certain quarters.
While some Dublin residential property owners breathed a sigh of relief, others are concerned what this deficit means within the context of a city and country still struggling with the pandemic.
The last few months have already witnessed a lot of movement in the area of Local Property Taxes.
Firstly, the annual charge, which was originally due on 21 March was put back to May before being waived once again to 1 July 2020.
This means that property owners due to have the value of their homes revised to correspond with current prices will not have to establish an up-to-date market value until the end of next year.
While both of these moves were intended to cushion the financial blows that landed courtesy of the COVID-19 curveball, this latest decision is not being viewed in the same way.
But why is that and what do any adjustments to the Local Property Tax mean for individual homeowners across the country?
To help you answer these questions and more, we’ve got the lowdown on everything you may want to know about Local Property Tax.
What is Local Property Tax (LPT)?
LPT is a self-assessed tax charged on the market value of residential properties.
Local councils have rate-setting powers including the power to increase or decrease the base rate by up to 15%. But the initial rates and valuation, along with the collection of fees, is carried out by the Revenue.
How is the Tax Used?
The tax is mostly issued to local councils for the provision of essential services including cleaning streets and street lighting, improving parks and public spaces, planning and development, and supporting libraries and local businesses.
Perhaps most crucially in this time of the coronavirus, and one of the primary reasons for the criticisms levelled at Dublin City Council’s LPT cuts is the fact that the tax is also used for the city’s ambulance service, the Dublin Fire Brigade, and various social services including homelessness services.
Individual savings incurred through the 15% reduction will be negligible for many. Taken together, however, the overall reduction will skim close to €12 million off funding for the abovementioned services and more.
While such a drop in resources at any time would leave the city vulnerable, a squeeze on these services during a post-pandemic period could prove particularly detrimental.
Not all of the LPT shillings are spent locally either. Some are used for capital spending on roads and housing. In 2019, €77m was shelled out of the overall €500m LPT accrued.
In addition, 20% of LPT payments received are added to an “equalisation fund” that’s then used to support financially weaker councils.
Who Must Pay It?
All owners of residential property, including rental properties, must stump up the cost of the LPT. But there are a few other folks who’ll also need to put the pennies aside for the payment. These include:
- People who have a long-term lease of 20+ years or life tenancies in a residential property
- Anyone with a life-interest in a residential property
- Anyone who lives abroad but owns a residential property in Ireland
- Local authorities and social housing organisations
- Personal representatives of a deceased owner, such as an executor/administrator of an estate
- Trustees, where a property is held in a trust.
There are also a few property types that are exempt from Property Tax payments including:
- Any houses or apartments built and owned by the builder or developer by not yet sold
- “Ghost estate” properties that have remained empty
- Homes that were vacated by their owners for 12 months or more due to long-term illness
How Much Do I Pay?
The amount of LPT that homeowners pay on their property depends on the market value declared on their dwelling on 1 May 2013.
Though this was due to be revised in November, the government deferred revaluation to 1 November 2021, meaning that property owners will continue to use the 2013 date next year.
The value of your home is assessed at 0.18% on the first €1 million and 0.25% on the amount of the value over €1 million. Following that, your local authority can adjust the LPT rate by up to 15%.
Along with Dublin City Council, South Dublin County Council and Fingal County Council both adjusted their rates downwards of 15% and 10% respectively.
That means, that a house valued between €250,000 - €300,000 in any of these three areas is calculated with an annual LPT cost of €495. However, in Dublin City and South Dublin County the additional 15% decrease slices €75 off that bill while in Fingal the 10% reduction means homeowners get to re-pocket €50, forking out €445 instead of €495.
These three local authorities were the only ones out of 30 councils nationwide to implement an LPT reduction. Most others have announced increases of at least 7.5% next year. (For a full list of adjustments, check out the chart below).
You can calculate your annual LPT liability with the Revenue’s Online Calculator.
How Do I Pay?
Revenue offers several different ways of paying the LPT. Homeowners can make one single payment or opt to divvy up payments and cash out in equal instalments.
Phased payments over the year include:
- Direct debit from your bank account
- Reduction 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)
- Cash payments (including debit or credit card) through approved payment service providers.
If you opt for paying in full in a single payment you can do it through:
- Annual Debit Instruction (ADI)
- Debit or credit card
- Cash payments (including debit or credit) through approved payment service providers such as the Post Office, bank, etc.
The 2021 date for annual payment is pencilled in for 21 March 2021.
What If I Don’t Pay?
If you don’t pony up your Local Property Tax, payment will likely be collected anyway. The Revenue can use a wide range of collection methods including:
- Mandatory deduction from your salary, wages or occupational pension
- Attachment of your bank account (this means popping into you’re your account without your consent and picking up the amount owed using an attachment order)
- Referral of the debt to a sheriff or a solicitor for collection
- The withholding of refunds of other tax as payment against the amount of LPT due.
Deferral of LPT Payment Possibilities
Of course, if you can’t pay you need to talk to Revenue or at least check out the information about deferring payments on the Revenue’s website.
There are certain circumstances whereby an individual might be able to defer or partially defer LPT payment.
These circumstances include situations whereby:
- A person’s income is below €15,000 for a full deferral and below €25,000 for a partial deferral. (€25,000 and €35,000 thresholds apply for couples).
- You’ve just inherited a property/are a representative of a person who has passed away
- You’ve declared personal insolvency with the Insolvency Service of Ireland (ISI) and have an insolvency arrangement in effect
- You’re suffering specific “hardship” as a result of significant and unavoidable financial loss in the current year.
However, be aware, that even if you do qualify for any of the above or deferment for other reasons, you still have to pay up at some stage and you should expect around 4% interest to be tagged onto the original fee.
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