Significant tax relief is available to first time buyers. William Donovan, Solicitor, moves in to explain
At a Glance
If you are a first-time buyer who either buys or self-builds a new residential property between 19 July 2016 and 31 December 2021, you may be entitled to claim a refund of the income tax and Deposit Interest Retention Tax (DIRT) that you paid over the previous four tax years. Under the July 2020 jobs stimulus package, the maximum relief available was increased temporarily. In Budget 2021, this increase was extended to the 31 December 2021. Contact William Donovan to find out more.
What is Help to Buy incentive?
The Help to Buy (HTB) incentive provides tax relief for first-time buyers. It applies to newly-built houses, apartments, and once-off self-build homes costing €500,000 or less. The incentive scheme refunds income tax and DIRT paid in Ireland over the previous four tax years.
You must comply with three categories of conditions:
1. HTB Conditions
- You cannot claim relief on PRSI or USC.
- If you are buying (or self-building) the property with someone else, they must also be a first-time buyer.
- You will not qualify if you have bought or built a property before, either individually or jointly with anyone else, even if you are now separated or divorced from that person.
- The incentive only applies to properties that are bought or built as the first-time buyer’s home.
- It does not cover investment properties.
- Cash buyers do not qualify.
- Inheriting or being given a property does not affect your eligibility.
- The HTB scheme only applies to properties costing €500,000 or less.
- You must live in the property for 5 years from the date that it is habitable.
2. Mortgage Conditions
You must take out a mortgage amounting to at least 70% of the purchase price (or, for a self-build, 70% of the valuation approved by the mortgage provider). This is known as the loan-to-value ratio. You may have a guarantor on the loan. A guarantor is someone who agrees to take responsibility for paying your mortgage if you do not or cannot pay it. Common examples of guarantors are parents or close relatives.
3. Tax requirements
If you pay tax through PAYE, you must be registered for Revenue’s online myAccount service. If you are a self-assessed taxpayer, you must be registered for the Revenue Online Service (ROS). In all cases, you must be fully tax-compliant for the four years immediately before your claim. If you have not already done so, you will need to complete Form 12 (PAYE) and Form 11 (self-assessed) online for each of those 4 years. You must also pay any taxes you owe.
Enhanced Help to Buy Scheme
Under the July 2020 jobs stimulus package, the maximum relief available was increased temporarily. In Budget 2021, this increase was extended to the 31 December 2021.
If you sign a contract for a new house or draw down on a self-build mortgage between 23 July 2020 and 31 December 2021, you are eligible for the increased relief (called enhanced relief).
You can claim relief for whichever of the following is the lowest:
- 10% of the purchase price of the property.
- 10% of the completion value of a self-build.
- The amount of income tax and DIRT you paid for the previous 4 years.
|Purchase price or valuation||1 January 2017 to 23 July 2020||23 July 2020 to 31 December 2021|
|Up to €500,000||Relief of up to 5% of purchase price or €20,000||Relief of up to 10% of the purchase price of 10% of valuation price on completion or €30,000|
|Over €500,000||No relief||No relief|
How to apply
There are two stages to the online process:
- The application stage.
- The claim stage.
If you are a PAYE employee only, you can apply for the Help to Buy incentive through Revenue’s myAccount service.
If you are a self-assessed taxpayer, you can apply through Revenue’s Online Service (ROS).
You can get full details of the process from Revenue.
How do I get the refund?
- If you buy a new build after 1 January 2017, the refund is paid directly to the builder.
- If you self-build the property after 1 January 2017, the refund is paid to a bank account you hold with your loan provider.
Buying a house can be very stressful, but the expert solicitors at HOMS Assist will make the entire process run smoothly for you. We provide practical, easy-to-follow advice for all stages of the conveyancing process. You will be informed of any potential issues before they arise, so you can look forward to owning your own home with as little hassle as possible. Contact William Donovan to find out more.