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Column 'In practice, how much help is the Help to Buy for first-time buyers?'

It depends largely on your personal circumstances. But if you are thinking of applying for this scheme then you would be wise to assess your eligibility and your options ASAP, writes Barry Flanagan.

FOR MOST FIRST-TIME buyers, paying a deposit is the first stepping stone to getting your hands on those precious new home keys. But saving for a deposit is a major roadblock for many who dream of getting onto the property ladder.

When the government launched the Help to Buy (HTB) incentive in Budget 2017, one of its key goals was to tackle just this issue. But in practice, how much help is HTB for first-time buyers?

The answer to that question depends largely on your personal circumstances. But if you are thinking of applying for this scheme then you would be wise to assess your eligibility and your options ASAP. There have been numerous recent indications this year that the scheme could be adjusted or even scrapped come Budget time.

What is the HTB scheme?

HTB provides first-time buyers with an opportunity to get an income tax rebate (both on the income tax and deposit interest retention tax (DIRT) that you paid in Ireland over the previous four years) of 5 per cent of the purchase value of a newly built home, up to a value of €400,000. That translates to a maximum rebate of €20,000.

Properties costing €400,000 to €600,000 will qualify for the €20,000 rebate, but the scheme does not apply to homes over €600,000 in value (€500,000 if you bought it after 1 January 2017). Also, universal social charge (USC) or pay related social insurance (PRSI) are not taken into account when calculating how much you can claim.

The scheme is backdated to July 19 2016 and is currently set to run to December 31 2019. Currently, there have been 2,652 HTB claims and 2,035 of these have been approved.

To date, the incentive has been of more benefit to those buying houses in the lower to mid-range market and it is not just for those looking to purchase at upper end valuations. In fact, the most common claim is for a house with a value of €226-€300k – over a third of claims (35.14%) fall into this bracket. Furthermore, the most commonly claimed amount of relief is in the €10-15k bracket.

The limitations

While HTB can be a very useful for many first-time buyers, it does have its limitations. For example, if you are applying for HTB in the expectation that the government are just going to hand you €20,000, try not to get your hopes up too high.

The only circumstances in which the government will pay the refund directly to you is if you bought or built the property between July 19 2016 and December 31 2016.

If you buy a new build after January 1 2017, the refund is instead paid to the contractor. And, if you self-build the property after January 1 2017, the refund will be paid directly to your loan provider. In other words, you will not be able to use the rebate as funds to refurbish or improve your new home.

Jumping through hoops 

There are also a number of hoops any applicant will have to jump through in order to qualify – this includes filing a tax return for each year you are looking to claim a refund and being tax compliant.

To qualify for HTB there are a number of boxes you’ll need to tick. For starters, you must:

  • Be a first-time buyer (should you be buying or building the new property with other people, they must also be first-time buyers to avail of HTB).
  • Buy or build a new property between July 19 2016 and December 31 2019.
  • Live in the property as your main home for five years after you buy or build it.
  • Be tax compliant and complete a tax return (if you are self-assessed you must also have tax clearance).
  • If purchasing from a contractor, choose one who is approved by Revenue.
  • Take out your mortgage (at least 70% of the purchase value of the property) with a qualifying lender. Cash buyers do not qualify.

If you are buying the property, you must have signed a contract to buy that property on or after July 19 2016. And, if you are self-building, you must have drawn down the first part of the mortgage on or after that date.

Being fully tax compliant

Being fully tax compliant is vital in order to qualify for HTB. You’ll need to be all square with Revenue for at least the four years immediately prior to your HTB claim. You will also have to file a Form 12 (PAYE taxpayers) or Form 11 (self-assessed) for each of the four years and you must pay any outstanding taxes that are due.

It’s important to note that, if you receive a HTB refund, and you do not tick the above boxes (for example, you don’t live in the property for the period of 5 years), Revenue are entitled to reclaim the refund in future.

Before you apply, you must register with Revenue and complete a tax return for each year you are seeking a tax rebate. In order to register with Revenue, you will need your PPS number, date of birth, phone number, email and home addresses.

If you are a first time buyer and you want to apply for HTB you can contact Revenue to get the ball rolling. Although, it may be wise to do so as soon as possible.

Barry Flanagan is Senior Tax Manager at www.taxback.com.

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21 Comments
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    Mute Kieran OKeeffe
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    Aug 7th 2017, 3:32 PM

    Informative article,but why talk of property ladders/starter home’s..with the exception of apartments,don’t most buyers plan on spending a lifetime in their home?

    44
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    Mute bopter
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    Aug 7th 2017, 5:09 PM

    @Kieran OKeeffe: Not at all. I’m on my third home and don’t plan to stay here for more than 5 more years, then hopefully it’ll finally be my dream home, which I’ll probably have till old age and then likely downsize to another property. I don’t think I’m unusual.

    24
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    Mute Chris Kirk
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    Aug 7th 2017, 5:37 PM

    @Kieran OKeeffe: Exactly, this is how the property market spiralled out of control the last time. A house should be looked at as a home instead of just a step on the property ladder by a greedy investor.

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    Mute Sean
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    Aug 14th 2017, 9:35 PM

    @Kieran OKeeffe: The house or apartment that you inhabit in your Twenties that meets your needs as a couple and your budget may not be the same property that meets your needs in your Forties when you have children and have saved up a bit more money. That is a chance mom scenario and is far removed from investing.

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    Mute Sean
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    Aug 14th 2017, 9:36 PM

    @Sean: typo.
    for /chance mom/
    read /common enough/.

    1
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    Mute Michael Collins
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    Aug 7th 2017, 4:51 PM

    1. Allow European banks in to compete with our own home grown thieves.
    2. Remove government interference of having 10 per cent of the value as a deposit.
    3. Abolish planing permission will significantly will reduce prices.

    30
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    Mute Michael Collins
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    Aug 7th 2017, 5:02 PM

    @Michael Collins: oh and stamp duty! We have lpt. Get rid of stamp duty

    17
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    Mute sue
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    Aug 7th 2017, 5:40 PM

    @Michael Collins: stamp duty still exists? I honestly thought that was Replaced by property tax?

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    Mute Michael Collins
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    Aug 7th 2017, 6:08 PM

    @sue: unfortunately no, take a look on daft.ie still on there.

    4
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    Mute Kev
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    Aug 7th 2017, 6:14 PM

    @Michael Collins: utterly ridiculous to suggest abolishing planning permission. If my neighbour wants to build a 6 story monstrosity in his back garden he should be allowed? What about subsequent traffic issues, complying with SUDs regulations and having a monstrosity on our road?
    Also having to ensure that people have 10% of their mortgage saved is a good idea – the only way I’d like to see this altered is if a person has a long history (3-5 years) of paying rent satisfactory then the 10% rule can be bypassed.

    27
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    Mute Michael Collins
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    Aug 7th 2017, 6:21 PM

    @Kev: kev Dallas TX has no planning law there is a documentary how these “monstrosities” built there.
    Then its the government fault for not keeping our infrastructure up to scratch. Dallas doesn’t have that problem.
    Well Kev my finances are between the bank and myself. I surly don’t need the parasite government telling anyone what to do on the free market

    1
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    Mute Michael Collins
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    Aug 7th 2017, 6:27 PM

    @Michael Collins: yes kev he should be allowed to build. I dont like to tell people what or what not to build.

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    Mute Kathleen Treanor
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    Aug 7th 2017, 8:00 PM

    I can’t believe nobody mentioned that the builders put the price of the houses up by 20grand the very second they got wind of the 20 grand help to buy scheme. An absolute abomination. This only hindered the struggling first time buyer even more.
    This scheme was to incentify the builders with more money for their fat bank accounts.
    What a travesty of a country we live in.

    30
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    Mute Mike Power
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    Aug 7th 2017, 3:55 PM

    I was delighted with the grant. 10k bonus covered a grand steel shed, sliding wardrobes and a 3 piece suite. Thanks FG ye clowns

    27
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    Mute Neuville-Kepler62F
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    Aug 7th 2017, 8:22 PM

    Help first time buyers by ..
    - remove VAT(€28,000) tax taken by Government ..no VAT in UK!
    - remove the €5000 social housing tax on new homes …
    - remove the €10,000 council tax for “services”!
    - remove the structural roadblocks on small builders to supply homes.
    - remove the cost of regulation and conveyancing … do your own in UK

    ….. Ireland a failed society unable to provide a framework to deliver shelter at affordable (1-income) prices for its citizens.

    Young people need to bring their brains to the Polling booths … En Marche!

    22
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    Mute Pádraig Ó Raghaill
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    Aug 7th 2017, 3:40 PM

    Why would you spend a lifetime in a home, how old fashioned? The best way to get ahead in life is through real estate. Get on the ladder that needs renovating, reinvest, rent out, build a retirement of bricks and mortar.

    12
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    Mute Jho Harris
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    Aug 7th 2017, 4:15 PM

    @Pádraig Ó Raghaill: It is not real estate, it is property and in recent times it has shown how greedy owners are which I assume you are guilty of. Many people cannot afford to buy a house these days and the likes of you and developers have made it lucky to get a roof over your head. Being decent to people needing a home must be old fashion for you when there enough desperate people out to take advantage of. So The Help to Buy scheme if is not helping first time buyers but the likes of you are making a killing which was not it was intended to do.

    48
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    Mute Pádraig Ó Raghaill
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    Aug 7th 2017, 5:27 PM

    @Jho Harris: Jealous much! – I am working on student accommodation as it is even more lucrative than standard rentals. However, I suppose supplying a clean bed, good amenities, and a safe environment for students is also bad in your books.

    Real estate, is the term commonly used, hence, the real estate market, etc and so forth.

    Maybe if you tried to be less of a begrudger you might have a better future.

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    Mute Jho Harris
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    Aug 7th 2017, 8:10 PM

    @Pádraig Ó Raghaill: I noticed that you had to mention all the plus points of what you seem to think you were doing for the benefits of the students but you are not providing any of this either cheap or affordable. Real Estate is an American commonly term certainly Irish, however, I wish you luck (not) but I hope having so many students paying your fortune they will teach you stop using ridiculous bad English such as “Jealous Much” My future is not based on greed so I am happy about my future.

    8
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    Mute Pádraig Ó Raghaill
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    Aug 8th 2017, 12:11 AM

    @Jho Harris: Well as I have lived in several countries I more than likely picked up that colloquialism from Australia. So while you wish to get all semantic on the etymology of a word usage your entire tenet smacks of stereo typical begrudgery.

    5
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    Mute Jho Harris
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    Aug 8th 2017, 9:54 AM

    @Pádraig Ó Raghaill: I don’t care what you think of me but you sign all the signs of greed.

    1
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