The Finance (Local Property Tax and Other Provisions) (Amendment) Act 2025 (the “2025 Act”) introduces targeted amendments to the Finance (Local Property Tax) Act 2012 (the “Principal Act”) and makes technical and policy changes to the Taxes Consolidation Act 1997 and the Value-Added Tax Consolidation Act 2010. The 2025 Act reflects the Government's ongoing review of the Local Property Tax (“LPT”) regime, aiming to make the system responsive to economic conditions, property market developments, and administrative needs.
Key Provisions
1. Revised Valuation and Tax Bands
- Basis for Valuation: The fundamental basis for valuation as set out in the Principal Act is not changing - householders must still assess the market value of their property as at a specific valuation date. The 2025 Act does however make changes to the valuation and charging structure for LPT.
- Valuation Period: The new LPT valuation period commences in 2026 and runs for five years, with the specified valuation date being 1 November 2025. The next revaluation date is set for 1 November 2030. The most immediate relevance of this is that liable persons will need to file and submit an updated return by 7 November 2025.
- Widening of Valuation Bands: Valuation bands are widened by 20%. This adjustment is intended to prevent most properties from moving up a band solely due to inflation.
- Increase in Charges: The fixed charges for the lowest bands are increased modestly (Band 1 rises from €90 to €95, Band 2 from €225 to €235). Other LPT charges increase incrementally, with most properties under €1.26 million seeing a 6% rise, and higher-value properties facing increases of 7-14%.
2. Local Authority Discretion
- Local authorities are now empowered to increase the LPT rate by up to 25% above the basic rate (previously 15%), while retaining the ability to decrease it by up to 15%. This change provides greater flexibility for local authorities to respond to local funding needs.
3. Indexation of Deferral Income Thresholds
- Higher Deferral Thresholds: The Principal Act allows eligible persons to defer payment of LPT if their income is below set thresholds. Deferred tax, with interest, becomes payable when a relevant event occurs, such as the sale of the property. The single-person threshold rises from €18,000 to €25,000, and the threshold for married or cohabiting couples rises from €30,000 to €40,000. Marginal relief thresholds are also increased, allowing partial deferral for incomes up to €40,000 (single) or €55,000 (couple). These changes ensure the deferral scheme keeps pace with inflation and wage growth.
4. Exemptions for Properties with Defective Concrete Blocks
- Expanded Exemption: The exemption for properties damaged by defective concrete blocks is broadened to add properties in Clare, Limerick, and Sligo, to those in Donegal and Mayo, aligning with the revised Remediation of Dwellings Damaged by the Use of Defective Concrete Blocks (Amendment) Regulations 2024.
- Updated Eligibility Process: The exemption now applies where a local authority issues a notification that the “damage threshold” has been met, reflecting changes in the grant scheme's administration. Eligible properties can claim a six-year exemption from LPT.
5. Administrative and Technical Reforms
- Mandatory Eircode Reporting: Eircodes become a required field in LPT returns, improving the accuracy of property identification and administration.
- Consequential Amendments: Various technical and administrative updates are made to ensure consistency across the Principal Act, including references to new exemption provisions and updated terminology.
6. Amendments to Other Tax Legislation
- Outbound Payment Defensive Measures: The Taxes Consolidation Act 1997 is amended to expand the criteria for determining associated entities for the purposes of outbound payment defensive measures, closing potential avoidance opportunities.
- VAT Rate Extension: The Value-Added Tax Consolidation Act 2010 is amended to extend the 9% VAT rate for the supply of gas and electricity until 31 October 2025.
Implementation and Commencement
The President signed the 2025 Act on Wednesday 2 July. Most of the main changes in the 2025 Act will apply from the LPT year commencing 1 January 2026. Some administrative and technical changes will commence on dates specified by Ministerial Order.
Conclusion
The 2025 Act introduces wider valuation bands, changes to LPT rates, greater flexibility for local authorities to vary LPT rates, and updates to exemptions and income thresholds for payment deferral. These measures alter how LPT is calculated and administered from 2026 onwards, reflecting recent changes in property values and other economic factors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
