Budget 2024 has come and gone with, it is perhaps fair to say, little fanfare. The prevailing mood post-budget day has been subdued, with nothing earth-shattering emerging from the speeches of Ministers McGrath and Donoghue. The heavy-duty Garda barricades erected outside the Dáil were, thankfully, left untouched, and taking a walk around campus on budget day, one was more likely to hear anticipation about the then-upcoming Ireland rugby clash with New Zealand than the direction of the country’s public finances.
Nonetheless, papers do not fill themselves!
The relationship between landlords and renters is an oft-debated one. Marx argues that landlordism has its “origin in robbery”, whereas others have argued that “one person’s rent is another person’s income”.
Regardless of your ideology, however, it cannot be denied that the relationship is often portrayed as an antagonistic one, both by politicians and the media alike. With this in mind, let’s take a look at what Budget 2024 had in store for both landlords and renters.
The Budget for Landlords
A new tax relief for landlords will be available against rental income from residential property beginning in 2024 and running until the end of 2027. The new measure is available only to individual landlords for tenancies registered with the Residential Tenancies Board (RTB) or for lettings of a residential property to a public authority.
The measure is targeted primarily towards small landlords (those with one or two rental properties), which, according to Minister for Finance Michael McGrath, represents 86% of the landlords in the market.
Under the measure, landlords in 2024 will have €3,000 of their rental income taxed at the standard income tax rate of 20%, as opposed to the higher rate of 40%. This may result in a benefit of up to €600 for a landlord, depending on the landlord’s individual circumstances. This amount will increase to €4,000 in 2025, corresponding with a possible €800 reduction in income tax, before rising to €5,000 for the final two years of the measure, meaning the measure may provide a maximum €1,000 benefit to the landlord.
Importantly, however, the benefits provided by the measure will only be enjoyed by landlords who keep their properties on the market for the full four years. If the properties do not remain on the market for the full duration of the measure, benefits accrued by the landlord will be clawed back by the Government.
It is, perhaps, important to note that the new tax relief for landlords is unrelated to the rent-a-room scheme already in existence. Under this scheme, individuals renting out a room or rooms in their main residence may earn up to €14,000 in rental income tax-free. If rental income exceeds €14,000 the entire amount is taxed. This scheme is often availed of by those providing ‘digs’ style accommodation and renting rooms to students.
The measure is touted as an important one in an attempt to keep landlords in the rental market amidst fears that landlords are exiting the rental market. A recent survey by the Residential Tenancies Board (RTB) reported that 18% of landlords were “likely/very likely” to sell their rental properties in the next two years. Given the current shortages in the rental market, record high rents, and not to mention other cost-of-living-related pressures, such an occurrence would likely greatly exacerbate the plight of many already struggling renters.
The Budget for Renters
Budget Day also brought welcome news for renters. The Rent Tax Credit will increase from €500 to €750 for 2024 and 2025. Correspondingly the credit will rise to €1,500 for couples jointly assessed for tax purposes.
Perhaps more significantly for students, rental payments made by parents in respect of ‘digs’ or rent-a-room arrangements for their children will now qualify for the Rent Tax Credit. This is subject to the condition that their child is attending an approved course and is not related to the landlord.
This change will also apply retrospectively for 2022 and 2023, meaning students or their parents may be able to reclaim the credit for the past rent paid.
The Rent Tax Credit was introduced in last year’s budget, however, the take-up of the measure was remarkably low. In his budget-day speech Minister for Finance Micheal McGrath stated that only 290,000 of the 400,000 people eligible to claim the credit had so far done so. In many cases, this is explained by tenancies not being registered by landlords with the RTB as is required by law and as is required in order to claim the rental credit. The higher €750 credit cannot be claimed until next year and eligible individuals may claim the credit online via their Revenue account.
The inclusion of landlords in Budget 2024 came as no surprise. There have been regular pledges from within Government, particularly from Fine Gael, that the budget would contain measures to help small landlords.
Unfortunately for the government, however, unsurprising does not equal uncontroversial. Sinn Féin’s Finance Spokesperson Pearse Doherty, displaying the aforementioned antagonistic portrayal of the landlord and tenant relationship, commented that “we needed a budget for renters. Instead, we got a Budget for landlords” – a claim strongly refuted by Minister for Public Expenditure Paschal Donoghue.
In the Government’s defence, Minister Donoghue cited the fact that the rent credit for renters will cost the government €300 million compared to the €112 million cost of the landlord credit and emphasised that the country needs small landlords. On an individual level, in 2024 renters will benefit from the rental tax credit up to a maximum of €750, whereas for landlords the maximum benefit of the tax relief is €600.
Ultimately, the question as to whether Budget 2024 was a budget for renters or landlords will rage on. As we run into the Local and European Elections in 2024, the answer to this may well be significant, particularly in relation to the votes of younger demographics which Budget 2024 was seen as targeting.
So, while we are busy deciding whether landlords or renters won Budget 2024, the debate may lead to bigger winners and losers come 2024’s election season.
Mark O’Rourke – Features Editor