First Time Buyers can use the Help To Buy (HTB) incentive to fund a part of the purchase price of their property using tax paid in previous years.
How much can I get?
At a first glance the incentive looks very appealing. Initial rules of the scheme set a cap of €20,000 this amount has been increased on a temporary basis to €30,000 under the Enhanced Help To Buy scheme. Current rules setting the higher cap will be in effect at least until the end of 2022. Unfortunately, when you get into the details of the scheme, things get a little more complicated.
The devil is in the details
How much you can really get is determined by several factors.
Firstly, the amount you can claim is connected to the value of the property you are buying. The scheme can help you finance a maximum of 5% of total purchase price of the property. This means that if you wanted to avail of the full €30,000, the property value would have to be €600,000. Show me a young person or a couple buying their first home for that price! There aren't many.
Secondly, it only works for new homes. The main problem here is that there aren't many new properties appearing on the market. In addition to that, prices of new homes are prohibitive for most even with the relief.
Thirdly, the scheme is actually a tax relief. This means that it is limited by the amount of taxes you paid. For the purposes of the scheme last four years are taken into consideration. This could be important if you are new to the state, or if for any reason you had a period of irregular income within the last four years.
You can find more information about the scheme and official guidelines on how to apply on the Revenue website
Here I am presenting a high level overview of the steps involved in the process
- Submit a tax return for each of the last four years. This is done to recalculate your tax obligations and resolve any tax underpayment or overpayment issues.
- Apply for HTB via Revenue. Revenue will assess your tax compliance and provide you with a maximum amount you can claim.
- Find a qualifying contractor and make an offer to buy the property. You will be able to make a claim after you sign the contract to buy the property.
- Submit a claim by uploading required property information to Revenue.
- Provide your claim reference to the developer.
- After verification, 5% of the purchase price of the property will be refunded to you.
I have to admit that I am quite critical of this scheme. It is my impression that it is designed to incentivise developers to build more rather than help young buyers. It can be argued that the scheme actually drives the prices higher. A very simple improvement would allow First Time Buyers to be allowed to spend it on second-hand property market. For some reason, however, politicians don't want go that direction.