MINISTER FOR FINANCE Michael McGrath has said that he will be examining the tax treatment of landlords as well as the tax credit for renters in the upcoming Budget.
However, the minister was tight-lipped on what exact changes can be expected for renters and landlords.
Introduced in last year’s Budget, the rent tax credit is available to renters whose landlords are registered with the Residential Tenancy Board and allows them to claim up to €500 tax back for the year.
Last week, Housing Minister Darragh O’Brien said that he would like to see the tax credit increased for renters in the forthcoming Budget.
When the credit was introduced originally, then-Taoiseach Micheál Martin said that it was only a starting point and signalled it would be increased in subsequent years.
Minister McGrath said today: “I’ll be examining the rent tax credit, in addition to examining the taxation treatment of investors and landlords in the market, to make sure that we have a steady supply of rental accommodation, not just in the short-term, but the medium to long-term.”
He added that bringing stability over a number of years to the supply of rental accommodation is key to the Government’s housing policy alongside getting a longer-term commitment from landlords in the sector.
In relation to any potential tax-changes for landlords, McGrath said he will be “trying to prevent the exodus of landlords and [trying] to make it more attractive for new investment to come into the sector.”
He added: “But of course, we will also be conscious of the situation facing many tenants. And while many tenants are in rent pressure zones, which does limit the rate of increase in the rent, for others who are entering into a new tenancy, for example, or people who are outside of a rent pressure zone the increase could well be far higher than that.
“So we will be considering the challenges that tenants are facing, as well as the need to bring stability to the supply of rental accommodation in the budget.”
Speaking to reporters in Cork yesterday, the Minister said that “too many landlords exit the market” but added that while it is not always because of tax reasons, it can be a factor in some cases.
In an interview with the Business Post last week, Housing Minister Darragh O’Brien said that he is working on a “backstop” for developers who cannot sell new-build apartments and that he is pushing for tax breaks for small landlords as part of the Budget package.
The backstop would involve the state buying any apartments developers cannot sell on the open market and using them for cost rental housing.
McGrath said yesterday that no final decisions have been made yet on the nature of any tax changes but he said the Government does intend to “examine data in further detail and make decisions in the next number of weeks that I think will help to bring stability to the rental market.”
Prior to the last Budget, then-Tánaiste Leo Varadkar said introducing some tax changes in the budget to encourage landlords to stay in the market was a “good idea”.
While the idea of tax breaks for landlords to keep them in the market was also floated by Darragh O’Brien in May 2022, when he told the Dáil that in order to retain individual landlords in the system, it “may require tax measures”.
However, despite this no such tax measures for landlords, other than minor changes relating to expenses, formed part of the Budget last year.
Therefore the pressure is on for them to deliver on their commitments this year.
Minister McGrath was speaking to reporters outside Leinster House this afternoon alongside Minister of State for Trade Promotion, Digital and Company Regulation Dara Calleary ahead of a Fianna Fáil enterprise roundtable discussion with industry representatives about Budget 2024.
McGrath was asked if PAYE workers can expect significant changes to the existing tax bands in October’s Budget as has previously been pushed for by Fine Gael.
Fine Gael’s taxation focus ahead of the autumn budget is to increase the income tax standard rate band to move it towards €50,000.
In last year’s budget, the entry point for the higher tax band rate increased by €3,200, to €40,000, meaning a smaller proportion of income is now subject to the higher tax rate.
An option being considered is a further increase on the €40,000, which it is understood Fine Gael is pushing for.
McGrath told reporters today that a lot of submissions have been received in relation to this issue as part of a public consultation exercise which he is now considering.
He said that the programme for Government commitment is clear and that it references the indexation of bands and credits in line with earnings growth, which seemed to indicate that the Government will not be introducing a third rate of income tax as it did not form part of its programme for Government.
“But we did ask as part of the consultation exercise for the Personal Tax Review, for opinions and views to be submitted on the possibility of a third rate of tax. Those have come in, and are now being considered… but no final decisions have been made,” the Minister said.
Elsewhere, McGrath was also asked about the extension of the bank levy.
He said changes to it will be announced on Budget day but said while all options are being considered an extension to the levy will not see it linked to banks’ profits.
He also said the Government is currently considering extending the levy to non-bank lenders.
“The bank levy is based on DIRT, so it’s associated with deposits. Whereas of course, the non-bank lenders are not deposit takers in general. And so any decision to extend the levy to the non-bank sector, which has not taken deposits would represent a change of policy, and therefore the basis of the levy would change and that would require legislative change, and so on.
“So we haven’t made any decision at this point in time,” McGrath said.
When asked about one-off measures, he said this would be decided on “what is appropriate for the economy”, but also said it would be “a challenging autumn and winter period for many” due to high energy bills and high mortgage interest rates.
“We don’t want to start pushing inflation back up in any material way. So we have to take all of that into account, but at the same time recognise that a lot of households do remain under real pressure.
“While the announcement by Pinergy yesterday was welcome, it’s only a start and energy prices remain high for many, many households and are likely to through the autumn and winter period.
“Of course for mortgage holders, unless they are protected by a fixed rate, since rates started to go up in July of last year, many of them have seen a very significant increase in their monthly mortgage repayments as well, so we do have to take into account the pressure that people are under.
“We haven’t decided yet the overall quantum and then the mix of measures between universal measures and targeted measures, but there will be (one-off measures),” he said.
With reporting from Christina Finn and Press Association
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