The property and construction sector was front and centre of any discussions in advance of Budget 2024, with an expectation that a number of significant measures would be introduced. As stated by the minister in his Budget speech, housing is “undoubtedly the biggest domestic challenge we face today”.
We welcome the minister seeking to address a number of the issues faced by participants in the sector – particularly in alleviating the financial burdens faced by tenants and homeowners (both existing and prospective), in providing incentives to small landlords to remain in the private rental market, and in providing time for further engagement with local authorities on the Residential Zoned Land Tax.
We are also keenly aware of the wide range of existing initiatives which have been rolled out separate to the Budget process – Housing for All, Croí Cónaithe, the Shared Equity Scheme, Cost-Rental Housing, and Project Tosaigh amongst others. These are having a tangible impact on the housing sector, and we welcome further measures to positively impact the challenges faced by all sector participants.
The measures announced in the Budget in respect of the property and construction sector are as set out below.
Measures to assist landlords and tenants
Rented Residential Relief
There has been much discussion around the importance of small-scale landlords in the Irish private rental sector. In acknowledgement of their vital role, and in order to address the decline of ‘small landlords’ in the private rental market, a new tax relief is being introduced, exempting a portion of rental income in certain cases.
This rental relief, which appears to be an income tax relief and so will exclude companies, will have a maximum annual value of between €600 - €1,000 per landlord. It is difficult to see how that, on its own, will encourage landlords to enter or stay in the market.
The exemption will be in the form of a tax relief at 20% of residential rental income up to €3,000 for 2024, €4,000 for 2025 and €5,000 for 2026 and 2027. This is equivalent to an annual tax credit for landlords of up to €600, €800 and €1,000 respectively.
A full claw-back of the benefit of the relief will apply if the landlord removes from the rental market, within 4 years, any of the rental properties held in year 1 when the benefit is claimed. The relief relates only to tenancies registered with the Residential Tenancies Board (RTB), or where a landlord lets a residential property to a public authority. In the case of joint ownership of a property, the relief will be divided in proportion to the percentage of the rental income to which each owner is entitled.
It is not yet clear if it is intended for the Rented Residential Relief to apply in addition to ‘rent-a-room relief’ or whether it will be possible to claim both reliefs.
Rent Tax Credit
In order to further alleviate the financial pressures on renters, the minister has increased the annual rent tax credit from €500 to €750. The credit is generally available to a tenant in the private rental sector who is not in receipt of any other State housing support. As previously, the Rent Tax Credit remains only available to tenancies registered with the RTB and licences for the use of a room in another person’s private principal residence.
The availability of the credit has further been extended to allow for parents incurring the cost of their student child’s ‘Rent a Room’ or ‘digs’ accommodation to avail of the credit. This change will apply retrospectively for the 2022 and 2023 tax years.
Measures to assist homebuilders and homeowners
Mortgage Interest Relief
As a measure to offset the considerable financial burden faced by mortgage holders due to significant increases in interest rates, a temporary one-year mortgage interest tax relief provision is being introduced. The mortgage interest relief is highly targeted and quite heavily capped and therefore will make only a small difference to those experiencing material interest rate increases.
Mortgage interest tax relief will be available at the 20% standard tax rate in respect of the increase in the interest paid between the calendar year 2022 compared to the calendar year 2023, where:
- the mortgage is in respect of a taxpayer’s principal private residence in Ireland;
- the outstanding mortgage balance was between €80,000 and €500,000 on 31 December 2022, and;
- the taxpayer is compliant with Local Property Tax requirements.
The maximum value of the relief is €1,250 per property and it is estimated that approximately 165,000 mortgage holders will benefit from this measure.
In order to claim the mortgage interest tax relief, the taxpayer must file a tax return with Revenue. The relief will operate by way of a credit offset against the taxpayer’s income tax liability in 2023. It is anticipated that the relief may be claimed in early 2024.
Help-to-Buy Scheme
The Help-to-Buy (‘HTB’) scheme is being extended for a further year until 31 December 2025. We believe this extension is both meaningful and helpful to the overall objective of facilitating housing supply.
The HTB scheme has been a significant support to first time buyers since its introduction in Budget 2017, with over 40,000 people having been supported to buy their home under the scheme. The scheme was due to end in 2024 and this extension will be welcome for prospective first-time buyers and indeed registered builders who can continue to bring marginal supply onto the market.
The scheme is also being amended to assist the users of the Local Authority Affordable Purchase (LAAP) scheme in accessing the HTB scheme. The affordable dwelling contribution received under the LAAP scheme will be usable for the purposes of calculating the 70% loan-to-value requirement of the HTB thereby facilitating access by all LAAP purchasers to the HTB scheme.
The minister also noted that he will consider in the coming year whether any further changes are required to the HTB Scheme.
Measures to assist developers and occupiers
Residential Zoned Land Tax (‘RZLT’)
In his speech, the minister emphasised the importance of the RZLT as an initiative to suitably activate housing supply, but acknowledged the importance of landowners having sufficient opportunity to engage with the mapping process and that a fair and transparent process is applied. As such, the minister has extended the liability date of RZLT by one year in order to allow for the planned 2024 review of the RZLT maps to take place and for landowners to further engage with the mapping process.
Where land was zoned for residential use and serviced by 1 January 2022, RZLT was previously to be charged and levied from 1 February 2024 onwards. This should now apply from 1 February 2025.
We welcome this extension of the liability date to allow for further engagement by landowners with local authorities in respect of the mapping process. However, we believe additional changes should be considered to ensure RZLT is not inappropriately applied where, for example genuine impediments to development exist.
Wider property sector measures
Vacant Homes Tax
The rate of the Vacant Homes Tax is being increased from three times to five times a property’s existing base Local Property Tax liability. This increase will take effect from the next chargeable period, commencing 1 November 2023.
The Vacant Homes Tax was introduced in 2023 with the stated aim of maximising the use of existing housing stock to increase the supply of homes available for rent or purchase. It applies to residential properties which are in use as a dwelling for less than 30 days in a 12-month chargeable period, and there are a number of exemptions to ensure owners are not unfairly taxed where properties may be vacant for genuine reasons.
Defective Concrete Products Levy
The Defective Concrete Products Levy is being amended such that it will no longer apply to the pouring concrete used in the manufacture of precast concrete products with effect from 1 January 2024.
A refund scheme is also being put in place to allow those who will have paid the levy on such concrete between 1 September 2023 and 31 December 2023 to reclaim it. This measure, previously announced by the minister on 6 September 2023, will be included in the forthcoming Finance Bill.
Queries? Get in touch
The measures announced in Budget 2024 will affect businesses and individuals across Ireland. If you have any queries on the impact of these changes for your business, please contact Jim Clery or Carmel Logan of our tax team.
We'd be delighted to hear from you.
Jim Clery
Partner, Head of Real Estate
KPMG in Ireland
Carmel Logan
Partner
KPMG in Ireland
