Within the next 2 weeks or so, you will more than likely receive a letter from Revenue with details of the new Property Tax (LPT). Your may not even receive a letter, but you will still owe the tax. This is a self-assessed tax and it will be up to property owners to decide how much property tax they are obliged to pay and then to make sure they pay what is owed to Revenue. With very few exceptions, anyone who owns a Residential Property in Ireland, whether owner-occupier or landlord will have to pay the tax.
Revenue will provide owners will an initial estimate of their property tax but it is up to each owner to decide on the actual valuation of their property and pay the tax owing. In fact, Revenue can pursue individual owners for under-payment of the tax, even if the owner has paid the amount that has been recommended by Revenue. Property owners are expected to take into accounts factors which may affect the value of their property, such as the state of repair, home improvements, extensions etc. The tax is calculated at 0.18% of the value of the property and only half the annual tax is due for 2013, with the full year’s tax due in 2014. Revenue have referred property owners to the Irish Property Price Register at www.propertypriceregister.ie to assist them in valuing their properties.
Properties valued below €1m, will fall into market value bands of €50,000, i.e. €100,001 – €150,000; €150,001 – €200,000 etc. The tax is calculated at the mid-point of each band, so two properties valued at €165,000 and €195,000 respectively, will both pay €157 in property tax this year, and €315 in a full year (2014), which is 0.18% of €175,000.
The market value of your property on 1st May 2013, will form the basis for the property tax due for 2013, 2014, 2015 and 2016. Property owners do not have to take into account any subsequent improvements to their property or any changes in market value up to 2016. Revenue will be issuing guidelines to property owners on how to value their properties and have said that if owners follow the guidelines honestly, they will accept owners’ property value assessments.
If you complete your return online, you have until 28th May 2013 to do this but paper returns must be submitted no later than 7th May 2013. The correspondence from Revenue will give you a Property ID and PIN, to enable online submission. You will also need your PPSN. There will be a number of payment options, from single payment option, credit/debit card, salary/occupational pension deductions or deductions at source from social welfare payments. A single payment will be debited from your bank account no earlier than 21st July 2013. Installment payments through Salary/Occupational Pension deductions will commence in equal amounts from 1st July 2013, and direct debit installment payments will commence on 15th July 2013. Whatever payment option you choose will continue for 2014 and subsequent years, unless you advise Revenue that you wish to change your payment method.
In yesterday’s Sunday Business Post, some ideas for reducing your tax bill are listed (see below). We are available to offer you additional advice in any or all of these
Tax Saver Commuter Tickets – for employees
Rent a Room Relief – Rental income of up to €10,000 allowed tax free
Rent Relief – if you are paying rent for private rented accommodation
Medical expenses – allowable at the standard rate of 20%
Work expenses- flat-rate expenses which are allowable for certain categories of workers, medical, architects & others
Film Finance – Section 481 fax relief for financing a film
Invest in a business – EII scheme allows up to 41% tax relief for investment in SMEs
Tuition Fees – tax relief available on college education fees
Bike-to-work scheme – employees can benefit from tax relief on buying a bicycle
Mortgage interest tax relief
As reported by Dan O’Brien in yesterday’s Irish Times, a paper published by the ESRI on the residential property market, based on census data, found large differences in the stock of unoccupied homes in urban and rural areas. The conclusion is that there is likely to an increase in demand to buy houses in urban areas, leading to an increase in prices.
Of greater interest to landlords, is the indication in the report that rents in urban areas will rise as a result of significant net immigration in the period to 2015. Despite what we were led to believe about foreign workers returning home as a result of the downturn and also our own young people leaving Ireland, it appears now that while large numbers of young Irish people emigrated, an even greater number of young foreign nationals came to Ireland, leading to net immigration of 50,000 for the period 2006-2011.
In addition, there has been a dramatic increase in the number of households in private rented accommodation in the 5 years to 2011. This may be as a result of a number of factors, i.e. a move away from the Irish tradition of home-ownership, expectation that house prices will fall further, lack of credit, lack of certainty re employment etc; but the report also concludes that renting is better value than buying, with 32% of households in Dublin city in rented accommodation.
With many landlords being ‘squeezed’ in recent years as a result of falling rental incomes and increased costs as a result of property taxes and other costs, even a small increase in rents has to be good news.
Yesterday, The Sunday Business Post listed some websites, designed to save you money. Here are some of our favourites:
www.bonkers.ie compare energy prices
www.pumps.ie find the cheapest petrol stations
www.hia.ie compare Health Insurance plans
www.comparetravelinsuanceireland.com for travel insurance comparisons
www.callcosts.ie compare mobile phone costs
www.skyscaner.ie compare airline costs
An article in yesterday’s Sunday Business Post tells us that to ensure greater compliance than with the recent Household Charge, the government are proposing to get Revenue, rather than local authorities, to collect Property Tax via the payroll system for PAYE workers. Similarly, self-employed workers would be obliged to declare their liabilities through their annual returns to Revenue. Only just over half of all households have paid the Household Charge, which was due last March.
There are some changes to the landlord’s NPPR tax this year.
1) Properties in the RAS scheme are no longer exempt from the tax, as applied in previous years.
2) There will be a handling charge of €10 for payments which are not completed online.
At SCK Group, we will pay your NPPR for you for all new properties let and managed by us this year. That will save you €200!
Further to Mr Patrick Honohan’s comments that the “banks will have to be more aggressive in repossessing properties in the buy-to-let sector” a couple of points should be noted. Firstly, as a company working closely with buy-to-let investors, we are unaware that the banks were ‘holding off’ on being aggressive with landlords. In our experience working with our clients, we have found that the banks have already been taking an aggressive approach with borrowers, and it has taken considerable effort on our part to get the banks to agree to any arrangement with the borrower. In addition, many landlords have cross-secured their buy-to-let investment with their home, so if the bank seek repossession, this will place the landlords home at risk.
Since the downturn landlords have seen their rental income drop, increases in variable mortgage interest, the introduction of NPPR, USC on rental income, the reduction of mortgage interest that is tax allowable to 75% and the recent introduction of the household charge. Take a landlord who has rental income of €12,000 pa . If is mortgage is on a variable rate, his interest repayments will typically also be €12,000 pa, of which he can only allow €9000 against his rental income, so he will be liable for tax, USC etc on €3000. He will also pay €300 in property taxes and will have other bills for service charges, maintenance costs etc. Unless the landlord has losses forward from previous years or unused capital allowances, he will be paying income tax on a negative income.
If the banks insist on repossessing buy-to-let properties, they will either sell them at a vastly reduced price, leaving the landlord with the remaining debt leveraged against his home, or the bank will attempt to manage the properties themselves. Managing buy-to-let properties is not the banks area of expertise. The bank would be better coming to an arrangement with the landlord with regards to his loan repayments and allow the landlord to manage his property himself, or with the help of a property management company, who have experience in the area and can maximise rental income and therefore enable the loan to be paid off over time.
At SCK Group, we have been working with our clients to help them navigate what has been a difficult time for landlords. We have been negotiating with the banks on their behalf and have had some success in this. Many landlords have not been utilising all the capital allowances available to them and we have been able to reduce their tax bill by advising them in this area. Some properties have fallen into disrepair because landlords have not had the money to pay for ongoing maintenance. When we realised that this was preventing landlords getting tenants for their properties, we set up our Property Refurbishment Scheme, whereby we will carry out the repairs, pay the up-front costs and then the landlord can repay us overtime from the rental income. This year, because we recognise the extra burden placed on landlords, we are going to pay the NPPR (second home tax), for all new properties let and managed by us.
Many people are having an exceptionally difficult time, in relation to reduced income and job losses with a knock on effect on family life, as reported by Isabel Morton in The Irish Times. Isabel suggests that we go through our contacts in our mobile phones, where we will be horrified at just how many people we know that have been and continue to be badly affected by the recession (or depression!).
Among our clients, we have experienced this also and consider those of us who are healthy and whose families are healthy, to be fortunate as many people have been decimated financially only to suffer the further hardship of ill-health among themselves or family members. Our latest newsletter gives some useful advice on Positive Thinking. Read it on http://www.sckgroup.ie/html/news.
Phone contacts list tells stories of woes, writes ISABEL MORTON
BORED WHILE sitting in Gatwick airport last Thursday evening, waiting for my delayed flight home, I started going through the names in my mobile phone and was surprised, as I stopped to think about each person and what I knew of their individual circumstances.
Many of those friends, family and work contacts, had of late, experienced fairly dramatic changes to their lives. No doubt, there were a lot more, whose problems I was not privy to, who were currently planning whatever exit routes they could. What struck me was how widespread and varied the problems were and how disruptive this “depression” is for almost everyone. Without a working banking system and the availability of credit, everyday life has become disconcertingly uncertain, unstable and for many, unsustainable.
Property can neither be bought nor sold with any vestige of normality and the knock-on affect that this economic stagnation is having on people’s everyday lives, is dramatic.
Add a few nasty extras into the already unpalatable mix, such as higher taxes, lower salaries, unemployment and the general malaise and suddenly family life is being seriously affected.
As I looked around the departures lounge, I wondered how many were forced into spending most of their week in London, away from their homes and families. Im finding it tiring enough myself, and my trips are short and infrequent.
Scrolling through my contact list, I came across a number of people who, up until relatively recently, had jobs at home but were now thankful to have a job anywhere, regardless of the commute.
There is one couple, whose “good life” I sometimes envied, as they live in a delightful but rather remote part of the country. Their circumstances have now changed, as one has to commute for work, leaving the other with their children and trying desperately to sell their beautiful home, at whatever price they can get for it. So far, they are not having any luck, as it fits into neither the category of farmhouse or holiday home.
Another family name came up on my screen. They eventually managed to sell their home and now live in a rented house in Dublin but are separated for most of the week as he works in England.
Then I came across a fair number, mostly those in the area of construction and property, who have long since given up hope of any revival and have scattered to far flung places in search of work.
One, whose husband is a civil engineer working in the Middle East admitted, the last time we met, that now their lives were so different, they found it hard to communicate. She felt resentful of him, away from the children and the everyday problems while he was resentful of her, being home with family and friends. But at least they could pay their bills and keep their heads above water.
A surprising number of people with families of all ages, have, over the last year or so, sold their homes and moved into rented accommodation. The further I went down through my list, the more people I realised I knew, who were no longer homeowners.
I was then reminded of a few more, whose properties had been sitting on the market for so long now that I’d actually forgotten about them. And despite having lowered their prices, changed their estate agents and increased their viewing figures, offers were still not forthcoming.
I came across some people, who have adult children (and in some cases, grandchildren) who have emigrated. Some are even managing the rental of those properties, now in negative equity, which their children have left behind.
And I’d forgotten about neighbours, who planned on downsizing, only for three of their four children to move back home, one with a toddler in tow, as she has separated from her partner and can no longer bear to live with him (they’ve not yet managed to sell their home).
I looked around at those waiting patiently to board: the usual bunch of grey-suited men with laptops and small overnight bags; a group of four cheerful English women in their 60s, laughing about which one’s eyesight and nerves were best suited to driving around Ireland’s tourist spots; a mother and her teenage daughter analysing the pros and cons of various British universities and the usual mix of others.
I took a phone call from a friend and mentioned how I was entertaining myself as I waited for my flight. She suggested that I was either exaggerating or knew an unfortunate bunch of people.
An hour and a half later she texted back. She’d just gone through her own contact list and was surprised at her findings.
Try it yourself. You’ll be amazed and probably horrified.
In these difficult times. it’s important for families to budget properly and to cut down on unnecessary expenses. John Lowe gives some tips in the Sunday Business Post.
Tips to hang onto family cash
05 June 2011
It is crucial to complete a household budget as your first exercise. First, work out exactly what you are spending each month and, from this, determine initially how much disposable – and, if applicable, surplus – income you have.
That is what is left after tax, and after you pay your rent or mortgage, household bills, food, petrol and ‘spending money’.
If your expenditure exceeds your income, you then have two choices – cut costs or earn more.
Remember to ask yourself: do you really need to buy that product or service and, if you do, is there a cheaper or better alternative?
2. Cut your banking and insurance bills
Overdrafts, especially those exceeding the limits, should be a no-no. Also, try to avoid arrangement fees, high interest rates and referral fees.
Surcharges, which are additional interest charges applied for exceeding overdraft limits, can be up to another 12 per cent annually, and unpaid fees all take their toll on your disposable income.
Credit card costs are similar – try and use your credit card like a charge card and pay it all off when the payment is due.
But be wary of using your credit card to take out cash, as you can be charge up to 26 per cent from the time you withdraw.
You should also shop around for the best mortgage and loan deals, not to mention insurance premiums – life, health, buildings and contents, travel and even your car.
Always compare quotes from your insurer with other options available in the market, or seek advice from an independent authorised adviser.
3. Find the right savings accounts
The most important decision about savings can be summed up in one word: start.
By planning to save, you are setting immediate goals – for holidays, an attic conversion, the new plasma 3D screen television you want or even funding Christmas presents for the children.
Save small, but save often, whether in a bank’s regular saver account, the post office or your local credit union.
Ensure your deposit-taker is regulated.
The Financial Regulator’s deposit protection scheme covers you for up to €100,000.Then it is a simple matter of finding the best rate. Remember the mantra: better in your pocket than theirs. So what’s the best regular saver account currently?
You can save between €100 and €1,000 per month for 12 months and receive 4 per cent interest from both EBS’s family regular saver account and Ulster Bank’s Special Interest deposit account.
4. Cut down your household bills
When you analyse your household bills, you will find you may have left the lights on for too long, or not used the washing machine on the night-time rate or had the central heating blazing while you were away for the weekend.
Choose the most appropriate utility plan for your needs and take advantage of the deals created by competition in the sector.
Travel bills can also be cut easily. Buy discounted or tax friendly bus passes, get the best rates on tolls by using www.tolltag.ie, or try a bicycle over time; not only is it cheaper, but better for you physically. If planning a holiday, hold out for last-minute deals.
Across all areas of spending, you will find ways to reduce your overheads. Always adhere to the Money Doctor mantra – stop spending and, if you must spend, ensure you are getting the best value.
5. Look for bargains
* Take advantage of special in-store offers – for instance, SuperValu is delivering real savings to parents with a baby and toddler event, including value-for-money offers on all things baby until June 18.
*Use coupons and discount
vouchers. * Go online and use discount websites – www.fatcheese.ie and www.onoffer.ie to name but two.
* Have fun for free: take the family to the town library, art gallery, museum or park.
*Generic and bulk buying – especially for family purchases, like nappies and baby food.
* Clothes: buy tough-wearing items and remember your family and friends will appreciate the clothes once your baby’s grown out of them.
There is no shame in hand medowns.
* Food: portion control is key. Follow healthy eating guidelines.
Portions of mashed potato or rice should be the size of a computer mouse.
For cheese, you should eat a golf ball-sized portion, while vegetables should take up over half your plate.
*Water is free, and far better for your children and you, than any soft drink – and tap water at that.