Farmers are to be subject to the Residential Zoned Land Tax which will see some farmland taxed at 3% of its market value.

Agricultural land will not be exempt from the tax, which could decimate farm incomes in the sheep and suckler sectors.

Farmers with land which has been zoned as suitable for residential development on 1 January 2022, and on which residential construction has not commenced before 1 February 2024, will be subject to the tax. It will be payable before 23 May 2024.

This zoning, aimed at driving house building, has been completed by local authorities with the initial maps outlining the areas affected in each county set to be published in the coming weeks.

In documents seen by the Irish Farmers Journal, Revenue uses several farmer examples to demonstrate how the tax will apply.

A suckler farmer with a 2ha field adjacent to a nearby town could have this field zoned for residential use and included under the tax.

If, on 1 February 2024, the 2ha is valued at €200,000, their tax liability for 2024 is 3% of this or €6,000. The Teagasc 2022 National Farm Survey found that 60% of suckler farmers earn less than €10,000 a year.

This means the average suckler farmer, who has 2ha of land zoned for the tax, could see their income cut by €6,000 annually.

Furthermore, if the tax is not paid, the farmer will not be able to sell or transfer the land, and annual interest of 8% will accrue as a charge on the land.

Surcharge

A surcharge will also apply if a farmer has undervalued their farmland. If the farmer files a land value of between 50% and 67% of the lands actual value, they will be liable to a 10% surcharge on the tax owed on this correct value.

Surcharge rates increase to as high as 30% for farmland significantly undervalued.

Farmers can appeal the inclusion of their land in residential zoning to their local authority and failing this, can appeal to An Bord Pleanála.