Wednesday 7 December 2016

All you need to know about your next property tax bill

Some areas hit by rises of up to 15pc but 'ghost estate' residents remain exempt

Published 20/11/2016 | 02:30

By Tom Halliday
By Tom Halliday

The 3,300 homeowners who are exempt from property tax, because they bought a house or apartment in a ghost estate, will continue to escape the tax for the next three years - even if the estate has since been finished. This is in stark contrast to the lack of property tax relief available to those whose homes were badly damaged in the floods of late 2015. Such homeowners cannot get an exemption from or reduction of property tax.

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Residents of 421 unfinished housing estates - more commonly known as ghost estates - qualified for an exemption to property tax when it was first introduced in 2013. Construction halted on much of these estates during the recession, with developments often left in a dangerous condition. There has been a big drop in the number of ghost estates around the country since 2013 as many of them have been finished and cleaned up - particularly those in Dublin and the commuter belt. However, homeowners who claimed an exemption from property tax in 2013 because they were living in such an estate at the time can still continue to do so until 2019 - even if the development is no longer a ghost estate, according to the Revenue Commissioners.

"In most cases, a residential property that was exempt from property tax on May 1, 2013 continues to be exempt until the end of October 2019," said a Revenue spokeswoman. "Properties that correctly claim the unfinished housing estates exemption will continue to be exempt up to and until the next valuation date - that is, November 1, 2019."

On the other hand, the only concession that owners of flood-damaged properties can get is the ability to defer the payment of their property tax bill until their financial circumstances improve - or their property is sold. A deferral is not an exemption from property tax and interest is charged on the deferred amount.

"The legislation does not provide for cancellation of a property tax liability - or for a reduction in the valuation of a property (as at May 1, 2013) on foot of occurrences such as the flooding of late 2015," said the spokeswoman.

"Revenue recognises that such events [that is, flooding] may cause particular challenges for some taxpayers in filing returns on time - or meeting their tax payment obligations. Any property owner whose home was flooded was advised to make contact with us and deferrals were granted to 10 householders on foot of applications they submitted."

Many aspects of the property tax seem unfair. For example, pensioners must pay it - even if their only source of income is the State pension. Those on low incomes (including such pensioners) can defer payment of the tax but the tax will eventually still have to be paid - as well as interest.

Unlike the now-suspended water charges, most of us have decided to grin and bear our property taxes. "The compliance levels for property tax are very high for people and the reason for that is that Revenue has the power to deduct the tax from wages, social welfare payments and so on," says Brian Keegan, director of taxation at Chartered Accountants Ireland. So, with the property tax bills for 2017 now arriving in the post, here's what you need to know about paying this year's property tax.

You do not need to pay more property tax if your home is more valuable

Many homes have gone up in value since the property tax was first introduced in 2013. Some of these homes are more valuable because of the recovery (albeit slow) in the property market.

Some are more valuable because owners have made improvements to their properties, such as adding an extension. There is no need to increase the amount of property tax you pay for 2017 if your home or investment property has increased in value since May 1, 2013 (the original valuation date for the property tax) - as long as your original valuation was honest.

"If you valued a property at €400,000 for property tax purposes back in May 2013, and that property has gone up in value since, it doesn't matter - you don't have to pay any more property tax as long as the 2013 valuation was fair and accurate," says Keegan. "The inverse is also true. You won't be entitled to a refund of property tax if you sell a property today for less than what you valued it at in 2013 (for the purpose of the property tax) - if that valuation was fair at the time."

Should you have deliberately undervalued your home so that you would pay a lower property tax, you should correct the original valuation - and pay the property tax owed. By self-correcting the valuation, you may be able to avoid interest and penalties. Since the property tax was introduced, the owners of about 10,600 homes have paid extra property tax after they either corrected their original valuation themselves - or did so after Revenue challenged the valuation put on a property.

When the property tax first kicked in, it was expected that homeowners would need to revalue their properties (for the purpose of the property tax) in November 2016. However, under Budget 2016, Finance Minister Michael Noonan postponed the revaluation date for the tax from late 2016 until 2019. You won't have to revalue your home until late 2019 as a result.

Your council could be the reason you face a higher property tax bill this year

Many homeowners are facing hikes of as much as 15pc in their property tax bills because their local authority has decided to increase their rate. Local authorities have the power to either increase or decrease the property tax rates in their areas by up to 15pc.

Nine local authorities have increased the 2017 rate compared to last year: Clare County Council, Cork City, Cork, Galway, Kildare, Limerick City and County Council, Louth, Monaghan and Wexford. Those in Clare, Galway (apart from Galway city), Cork city and Limerick will be hardest hit. Clare homeowners will see property tax bills for 2017 increase by 15pc on last year. Homeowners in Limerick, Galway and Cork city are facing hikes of 10pc.

You don't have to pay any property tax on a new home for another three years

Should you have just bought a new home, you don't have to pay any property tax on that property until 2019. New and previously unused properties bought from a builder or developer between January 1, 2013 and October 31, 2019 are exempt from the tax.

Should you have bought a second-hand property or built your own home at any stage in 2013, you do not have to pay property tax until 2019 either - as long as you are living in this property and it is your sole or main home. (This exemption is not restricted to first-time buyers.)

You have five days to tell the Taxman you want to pay by direct debit

You have until November 25, 2016 to tell Revenue that you want to spread your payment of the tax over the year - if you have previously paid the tax as a one-off lump sum but can no longer afford to do so.

You do not face any extra charges for spreading your payment of the tax over the year (the phased payment option). With this option, you have three ways to spread your payments out - by direct debit, deduction at source (where the tax is taken out of your wages, occupational pension or certain social welfare payments) or through regular cash payments (where you pay your tax through An Post, Payzone, Omnivend or your credit union).

You could only have 52 days to pay the tax as a lump sum

You have either two or four months to pay your property tax if paying it in one lump sum, depending on how exactly you are doing so.

Should you be paying by debit card, credit card or in a single cash payment (through An Post, Omnivend, Payzone or your credit union), you must do so by January 11, 2017. Should you wish to pay through a one-time withdrawal from your bank account, you have until March 21, 2017 to settle your bill.

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