Property tax changes: What price to put on your home?

Since Revenue disclosed details of its property tax revaluation campaign back in mid-September, households around the State have started to fret about how much their home is worth.

Where just a few short weeks ago, people were talking jubilantly about how much the house across the road had sold for, now there is a fear that exuberant house prices will cause a sharp rise in property tax bills.

Here we take a look at how households can approach the task of valuing their home, and consider whether an accurate new valuation will ultimately lead to a higher bill.

New regime

The revaluation been a long time in coming. Originally, homeowners valued their homes for the purposes of property tax back in 2013 to facilitate the introduction of the tax. They were supposed to revalue their homes in 2016 to keep the tax current. However, this valuation date was postponed to 2019, and then again to 2020.

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Now the revaluation is finally taking place, on November 1st. Ahead of this date, Revenue has already sent out 900,000 letters to homeowners advising them of their obligations in this regard, and has had 100,000 homeowners already file their property tax returns for 2022.

Homeowners shouldn’t fear getting such a letter.

"My main message is that the local property tax (LPT) liability shouldn't be a big jump for anybody. This is the main thing you need to keep in mind," says Norah Collender, professional tax leader with Chartered Accountants Ireland, noting that the rate at which the tax is levied has been reduced, and bands have been widened, to address rising house prices.

“You shouldn’t get a huge bill,” she says.

So, just because the price of your house may have risen by 70 per cent over the period since the last valuation, it doesn’t mean your property tax bill will also see a similar increase.

Property tax is expected to yield about €492 million this year; under the new approach to the tax, the target is just €560 million, or 13 per cent more. And, as Collender notes, most of this bump in yield is likely to come from the 79,000 or so homes currently exempt, who will start to pay the tax in 2022 – and not from those who are already paying the tax.

Valuation

As with 2013, property tax is still a self-assessed tax, which means it’s up to the homeowner to provide a valuation, although Revenue will provide homeowners with an estimate, which you can read when you check your Revenue profile online.

Before you get a fright when you see this estimated value however, it’s worth noting that Revenue stresses that “this estimate is not based on an actual valuation of the property”. Rather, it’s a figure that will be used in the event that no property tax return is filed by November 7th, 2021.

Another guide which can confuse is the Revenue's interactive tool, found here. To use it, you simply input your address and click search to bring up your property on Revenue's valuation map. By then clicking on the little dot that appears, you'll be able to see in which band Revenue has placed your home.

The tool can be useful, but again, it’s just a guide. As Revenue itself notes: “The average valuation band indicated on this tool for your area may not reflect your property’s value”, noting that the tool does not determine the value of individual properties.

“It simply would not be possible as the specific data is not readily available – eg the square footage and condition of each property,” a spokeswoman says. Nor does it allow for the cases of modest homes sited close to very upmarket roads.

Discrepancies abound – both in terms of undervaluing as well as overvaluing properties. For example, the valuation tool shows the homes on Silchester Road in Glenageary in the €1.225 million–€1.312 million band. Take a look at the price register, however, and you'll see several recent house sales there for far in excess of that, including one for €2.5 million and another for €4.8 million.

In nearby Silchester Park, an estate of similar homes of varying modernity, there are further complexities: 21 Silchester Park, which recently sold for €800,000, is shown on the tool in the same band as the more expensive Silchester Road. Meanwhile, 110 Silchester Park, which recently sold for €750,000, is in a lower band (although not low enough perhaps) of €875,001-€962,500, while 76 Silchester Park, which sold for €950,000, is in yet another band, of €1 million-€1.137 million.

So, if you’re of the view that the valuation the tool shows up for your house is inaccurate, you’re fully entitled to submit your property at a lower or higher valuation.

Revenue says it will not contest people who value their properties one band lower than its own guidance in the online tool. Go any lower however, and you will likely need some form of additional evidence in the event that Revenue questions your claim.

The sources for such evidence will likely include the Residential Property Price Register, and other sources, including newspaper reports, and property websites such as MyHome and Daft.

You may decide that you would like documentary evidence to back up your valuation, such as that provided by a professional valuation from an auctioneer. While many estate agents offer a free valuation on homes on the assumption that the homeowner is considering selling the property, a valuation on its own can cost upwards of €100.

In Terenure, south Dublin, Jillian McGuirk of estate agents McGuirk Beggan has already had "loads of enquiries" from people looking for a valuation. She says the cost of the service varies depending on the size of the property, and can be anywhere from €100 plus VAT at 23 per cent to €200 plus VAT.

You may decide that a professional valuation is worthwhile, however, if your property is not easily valued. It might offer peace of mind, for one, and a professional valuation that puts you in a lower band may save you money over time. This may be true if your property is different to those surrounding you, is a one-off, or is in an area where sales have been few of late.

It may also be helpful for properties with a market value of more than €1.75 million, as, for these, you have to declare an actual individual valuation for your property, rather than assign it to a band.

Homeowners may also need to consider the value of surrounding land. According to Revenue, where a property has adjoining land of more than one acre, it is only the land up to an acre that must be valued for LPT purposes. This is also the case for farms – the farmhouse and land up to one acre is included in the valuation, but additional buildings and land are not.

Moreover, a self-contained granny flat is liable for property tax – but if both it and the main property are owned by the same owner, then both buildings can be valued as one for the purposes of the property tax.

But what if you get it wrong?

Well, in the first instance, Revenue says that where it has cause for concern, it will ask the property owner to support their valuation with evidence of the information sources on which he or she based that self-assessment. If that valuation still can’t be supported after this, Revenue says it will then “engage with the property owner to agree a revised valuation”.

Will I pay more?

Once you have worked out your valuation band, you’re going to want to know how much tax you’re going to have to pay.

Given rocketing house prices over the past number of years, many homeowners will likely fear a similar sharp rise in their property tax bill. However, this won’t be the case for most, due to the new system.

According to estimates from the Department of Finance, about 36 per cent of homes will face a higher bill, while 53 per cent will see no change. A further 11 per cent will see a reduction in their tax.

This is because, under the new regime, the bands have been widened and the rate of tax reduced, from 0.18 per cent on values up to €1 million previously, to 0.1029 per cent.

This means, for example, that those in the lowest band, with homes worth up to €200,000, will pay an annual charge of €90, rising to €225 for the next band, €200,001-€262,500, and so on.

Houses valued at more than €1.75 million will be charged on the exact prices. A rate of 0.1029 per cent will be charged on the value up to €1.05 million, a rate of 0.25 per cent on the amount between €1.05 million and €1.75 million and 0.3 per cent on the balance.

How much you owe will also depend on whether or not your local authority has decided to increase, or decrease, the basic rate at which the tax is levied by 15 per cent, under the local adjustment factor.

Councillors in Dún Laoghaire-Rathdown, South Dublin and Dublin city, for example, voted on cutting the rate by 15 per cent earlier this year. In Cavan, Clare, Donegal, Kilkenny, Leitrim, Limerick, Longford, Monaghan, Offaly, Roscommon, and Sligo, however, councillors voted to increase the base rate by the full 15 per cent.

Winners will be those who now find themselves in a lower band, due to the changes – for example, a home worth €150,000 would previously have been in the €225 band. Now it will drop back to the €90 band. Of course, the issue here is that the home is now likely to be worth €200,000+, which means it will be in the €225 band once more.