BUDGET IRELAND 2025 – Taxes in relation to Property

 

The aim of this article is for you to understand the Tax measures of Budget 2025 which relate to property transactions, at a glance.  Today, the Minister for Finance and the Minister for Public Expenditure, NDP Delivery and Reform, announced the details of Budget 2025.  As anticipated, it introduced several tax measures in relation to property.  This article will focus on the property related tax measures introduced by Budget 2025, under the following headings:

 

1. Income Tax/Personal Tax,

 

2. Residential Zoned Land Tax (RZLT),

 

3. Stamp Duty,

 

4. Vacant Homes Tax (VHT) and

 

5. Value Added Tax (VAT).

 

 

 

 

INCOME TAX / PERSONAL TAX

 

 We intend to focus on the four main areas of change that could effect you:

 

 

 Rent Tax Credit

 

Budget 2025 raised the Rent Tax Credit

The Rent Tax Credit has been increased to:

• €1,000 for individual renters, or

• €2,000 per year for jointly assessed married couples/civil partners.

 

 

What years does this apply to?

This applies to the tax years 2024 and 2025.

 

 

What were the previous rules?

Prior to this, the Rent Tax Credit for 2024 was worth:

(a) €750 for a single individual and

(b) €1,500 for a jointly assessed married couple/civil partners.

 

 

Are these new rates backdated?

These new rates have been backdated to cover the 2024 tax year as well as the 2025 year of assessment.

 

 

 

 Mortgage Interest Relief

 

Mortgage Interest Relief has been extended.

 

 

Have there been any changes to the qualifying criteria?

There has been no change to the qualifying criteria.

 

 

What is the outstanding mortgage balance for homeowners on their Principal Private Residence?

Between €80,000 and €500,000, as of 31st December 2022.

 

 

On what will Qualifying homeowners will be eligible for this tax relief?

 In respect of the increased interest paid on their mortgage in 2024 as compared with 2022.

 

 

What tax rate applies?

Tax Relief is at the standard Income Tax rate of 20%.  The Tax Credit is capped at €1,250 per property.

 

 

How do you claim the Mortgage Interest Relief?

The taxpayer must file a Tax Return and be compliant with Local Property Tax (LPT) requirements.

 

 

 

Help to Buy Scheme

 

The Help to Buy Scheme has been extended for a further four years at the current rates until the end of 2029.

 

 

What is the aim of this scheme?

To provide certainty for future home buyers, as well as the Irish property market.

 

 

What is the “Help to Buy” Scheme?

It’s a tax rebate available to first-time buyers .  The purpose is to enable them to buy a newly built or self-built house or apartment.  This is provided the cost of that purchase is €500,000 or less.

 

 

With the extension of this scheme, first-time buyers of residential property will be able to continue to avail of:

(i) Income Tax and

(ii) Deposit Interest Retention Tax refunds

to help them purchase their home.

 

 

 

What does the Scheme offer?

 

1. A tax refund to first-time buyers, with a maximum value of €30,000 or 10% of the property price, whichever is less.

 

2. The refund will be from the four tax years prior to when the application is made.

 

3. The refund will not include any refunds already claimed.

 

 

 

 

Pre-Letting Expenses Relief

 

 

What is the Current Tax Relief?

It’s capped at €10,000 per premises. For certain pre-letting expenditure, it will be extended for a further three years to 31^st December 2027.

 

 

What does Section 97A TCA ‘97 deal with?

Rental expenses.

 

 

What does it provide?

Certain expenses, incurred on a vacant residential property before its first letting following a period of non-occupancy, are allowable as a deduction against rental income from that specific premises.

 

 

How much are pre-letting expenses?

They’re capped at €10,000 per property.

 

 

When are pre-letting expenses allowable?

They must be incurred on a property that was vacant for a minimum of six months and then let as a residential property on/before 31^st December 2027.

These provisions allow for a deduction for certain pre-letting expenses which, otherwise wouldn’t be allowable.

 

 

 

 

RESIDENTIAL ZONED LAND TAX (RZLT)

 

• As part of its strategy to meet an increased demand for housing, the Irish Government introduced the Residential Zoned Land Tax (RZLT).  It’s a new tax on land which is zoned for residential development and which has, in place, all the necessary services to develop housing.

 

• It was originally introduced in Finance Act 2021.  It stated that owners of lands which are zoned under the RZLT were to be taxed at a rate of 3% of the site’s market value from 1^st February each year commencing in 2025.

 

 

 

Who is not obliged to register for Residential Zone Land Tax?

• Owners whose properties are subject to Local Property Tax and have a garden exceeding one acre.  They will not be obliged to pay Residential Zoned Land Tax. They will, however, be required to complete and file a Tax Return containing details of the property.

 

 

Do landowners have an option to re-zone their land?

Budget 2025 has provided landowners with an option to re-zone their land.  Based on the economic activity carried out on their land, they can seek changes to the zoning maps in advance of the final maps being published on 31^st January 2025.

 

 

 

 In summary:

• A new process is available to certain landowners to obtain an exemption from the tax in 2025 where their land should not be subject to the tax.

• Budget 2025 has also introduced a twelve month deferral of the liability. This is between the date planning permission was granted and the commencement date of the development

 

 

 

 

 STAMP DUTY

 

 

New 6% Residential Rate

 

 

A new 6% rate of Stamp Duty has been introduced on residential properties from 2^nd October 2024.

 

The stamp duty rates for residential properties will now be as follows:

 

• 1% on consideration up to and including €1m

 

• 2% on consideration over €1m and up to and including €1.5m

 

• 6% on consideration over €1.5m

 

The existing stamp duty rates will continue to apply to instruments executed before 1^st January 2025 on foot of a binding contract in place before 2^nd October 2024.

 

 

 

 

 

10% rate for Bulk Purchases increased to 15%

 

• Where a person acquires at least ten residential units during any twelve month period, the higher rate of stamp duty is being increased from 10% to 15%, with immediate effect.

• The existing 10% rate will continue to apply to instruments executed before 1^st January 2025 where a binding contract was in place before 2^nd October 2024.

 

 

 

 

VACANT HOMES TAX (VHT)

 

A Vacant Homes Tax (VHT) was introduced by the Irish Government in Finance Act 2022.  The aim was to encourage an increase in the supply of residential properties available for rent or purchase. As a further incentive, Budget 2025 has increased the rate of the VHT.  The increase is from five to seven times a property’s existing base Local Property Tax (LPT) liability.

 

When will it take effect?

From 1st November 2024.  In other words, the next chargeable period for Vacant Homes Tax.

 

What does VHT apply to?

Any residential property which is occupied for less than 30 days in a twelve month period between 1st November and 31st October of the following year.

 

 

 

 

VALUE ADDED TAX (VAT)

 

 

VAT Rate on Heat Pumps

 

• A reduction in the VAT rate for heat pumps to 9% is effective from 1^st January 2025.

• This applies to the supply and installation of heat pumps.

• The heat pumps must meet specific technical standards, as outlined in the EU Directive.

• The aim is to encourage homeowners to install heat pumps to support climate action.

 

 

 

 

VAT Rate for Gas & Electricity

 

• The 9% rate of VAT on gas and electricity is to be extended until 30^th April 2025.

• The rate had been due to revert to 13½% on 1^st November 2024.

• The aim of this extension is to reduce the cost of living.

 

 

 

If you are interested in full information on Budget 2025, please click https://www.gov.ie/en/publication/e8315-budget-2025/

 

 

 

Accounts Advice Centre is a specialised firm of Accountants and Tax Consultants for property owners and landlords.  We offer dedicated services for rental income, Capital Gains Tax and landlord-specific reliefs.   If you would like to make an appointment about Irish property taxes for landlords and investors, please email queries@accountsadvicecentre.ie

 

 

 

 

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.