What is the Help to Buy Scheme?
The Help to Buy scheme is a very attractive incentive for first-time buyers or builders.
The Help to Buy scheme was introduced at the beginning of 2017 in a bid to reduce the amount of deposit needed for first-time buyers and consequently reduce the strain on the rental market. The potential implications are that a first-time buyer would only need to save 5% of the purchase price rather than the usual 10% as the incentive could give you a refund of Income Tax and Deposit Interest Retention Tax (DIRT) that you paid in Ireland over the previous four years if you meet the conditions of the scheme.
The rebate is available to first-time buyers of new houses, apartments or self-builds, subject to a limit of 5% of the purchase price up to a maximum of €20,000.
Example 1. Buy/build a house for €250,000- deposit required €25,000 (10%) Get tax rebate €12,500 and savings €12,500.
Example 2: Buy/build a house for €450,000 – deposit required €45,000 (10%) Get tax rebate €20,000 (maximum available) and savings €25,000.
How much can I claim?
The amount that you can claim is the lesser of:
- 5% of the purchase price of a new home. For self-builds, this is 5% of the completion value of the property
- the amount of Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in the four years before your purchase or self-build.
- The maximum payment is €20,000 per property. This cap applies regardless of how many people enter into a contract to buy a house.
- Universal Social Charge (USC) or Pay Related Social Insurance (PRSI) are not taken into account when calculating how much you can claim.
How is the refund paid?
- If you bought or built the property between 19 July 2016 and 31 December 2016, the refund will be paid directly to you.
- If you buy a new build after 1 January 2017, the refund will be paid to the contractor.
- If you self-build the property after 1 January 2017, the refund will be paid to the bank account of your loan provider.
Do I qualify?
Before you start thinking about what you are going to do with your tax refund, be aware of the restrictions in place for this scheme.
To qualify for the Help to Buy scheme, you must:
- Be a first-time buyer – You will not qualify for the rebate if you have previously bought, built or inherited a property either individually or jointly with someone else. If you are buying the property with somebody else they must also be a first-time buyer. Incentive not available to cash buyers or investment property buyers.
- buy or build a new property between 19 July 2016 and 31 December 2019
- live in the property as your main home for five years after you buy or build it- If you sell the property within this period the rebate is clawed back on a pro-rata basis.
- be tax compliant, if you are self-assessed you must also have tax clearance.
- Stay within the purchase price thresholds – Property purchase price/build cost are limited to up to €600,000 for contracts signed between 19 July 2016 and 31 December 2016 or up to €500,000 for contracts signed between 01/01/2017 – 31/12/2019.
- Buy your home from an approved contractor – The contractor you are purchasing your home from must be approved by Revenue. You can check the list of approved developers and contractors to make sure that your developer or contractor is approved
- Take out your mortgage on the property with a qualifying lender. This loan must be used only for buying or building the property. The loan must be at least 70% of the purchase value of the property. This is known as the loan to value ratio. You are allowed to have a guarantor on the loan.
- Be registered for Revenue’s online My account service. Register here: https://www.ros.ie/myaccount-web/home.html
I think I qualify – how do I apply?
Before you apply, you must be registered for either:
- myAccount, if you are an employee and pay tax through PAYE
- Revenue’s Online Service (ROS), if you are self-employed.
- Further information on applying for the scheme is available here http://bit.ly/2D6WgEF .
MLMG are Independent Financial Advisors based in Buncrana, Co. Donegal. We pride ourselves in providing honest expert financial advice in a way that is easy to understand. Every client, big and small, is treated the same; you will be advised on the basis that we are standing in your shoes; We will take the time to ensure you understand your finances and your financial needs. We then help you put a plan in place to protect you, your family, your business into the future. We are independent – not tied to any specific bank, financial institution or product provider.
Is your existing agent giving you information on potential schemes you can avail of? If not, are you missing out on other very relevant information? At MLMG our purpose is to keep our clients up to date and informed. Contact us here or call MLMG on 07493 21420 for a consultation.
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