Q&A: Property tax

The local property tax is now reality, or it will be when the Finance Bill puts into law Michael Noonan’s budgetary measures. But, in announcing the details, the Minister has raised a whole series of questions for homeowners. The tax will be levied at 0.18 per cent on the market value of the property below €1 million; while on any value above that threshold, the tax will be 0.25 per cent annually.

What properties are covered by the tax?

The tax covers all residential property in the State.

Who’s responsible for paying this tax?

The owner of the property is liable. That includes owners of properties rented out to tenants. Only if the tenant has a lease of more than 20 years or a life tenancy does responsibility pass to them.

What happens for local authority homes?

The local authority, or social housing organisation, as owner, is responsible for paying the tax, not the tenant.

Who decides the market value of the property?

The tax will work on the basis of self-assessment. However, the Minister said that Revenue wouldl issue guidance on how to value property. If homeowners prefer, they can get a valuation from a “competent valuer”. To allow for local discrepancies, the tax will work on the basis of market value taxable bands.

And when do I have to set the value?

The value is set on May 1st next. The Revenue will be in communication with all homes before then. Once set, the valuation will stay unchanged until the end of 2016.

Getting back to those taxable bands. How do they work?

The first band will cover all properties worth up to €100,000. Thereafter bands will ascend in multiples of €50,000 – ie €100,001 - €150,000, €150,001 - €200,000 and so on up to €1 million. The tax will be assessed at the mid-point in the band up to €1 million. For properties over €1 million, you are taxed at 0.18 per cent of €1 million, with the balance taxed at 0.25 per cent.

Well, I’m far short of €1 million. If my home is worth €395,000, what tax do I pay?

At €395,000, your home will fall in the €350,001-€400,000 band. The mid-point of that band is €375,000. Multiplying that figure by 0.18 per cent, you get €675. That will be your local property tax bill for a full year.

So that’s the bill I’m facing next year?

Not next year. They are only introducing the new tax in July, so for 2013 you will only pay half the annual sum – in your case, €337.

Okay, but if the house was worth, say, €1.3 million, how would you work it out?

Bands don’t apply for property valued at more than €1 million so you simply calculate 0.18 per cent of the first €1 million, which is €1,800, and then add 0.25 per cent of the balance – in this case, €300,000 – which amounts to €750. All told, the annual tax bill would be €2,550. Next year, it will be half of that.

Once I figure out the cost, how do I pay it?

The Revenue is making it very easy for homeowners to pay their bill. You can pay by direct debit, credit card, debit card and a bank single debit authority. You can also arrange to have the sum deducted at source by your employer, or the entity paying your occupational pension. Deduction at source will also work in relation to certain payments from the Department of Social Protection or the Department of Agriculture.