More than three years in the making, and with no little controversy, Residential Zoned Land Tax (RZLT) finally came into effect on 1st February 2025.
But what exactly is RZLT, why is it being introduced, and who will pay it? Here’s snapshot of everything you need to know.
What is Residential Zoned Land Tax?
RZLT is a tax on land and property that is ‘zoned’ for residential development, but which is not currently being used for residential purposes.
The tax will be charged annually at 3% of the market value of qualifying property.
Why is RZLT being introduced?
RZLT was signed into law as part of the Finance Act 2021. It forms part of the government’s ‘Housing for All’ strategy to ease the country’s long-running housing crisis.
The rationale behind the tax is to incentivise residential development by making it more expensive for owners of suitable land to either a) leave it undeveloped or b) put it to other uses. It has been dubbed the ‘land-hoarding tax’ in some quarters because it penalises landowners who sit on vacant land hoping it will increase in value in the future.
Why has it taken so long for RZLT to be introduced?
Before the tax could be introduced, the zoning framework had to be put in place to decide which land would be deemed suitable for residential development and fall under the remit of the scheme.
This process has been subject to long periods of consultation with a wide range of stakeholders, including landowners and the construction industry, and has caused no little controversy. After a lot of wrangling and several deferrals following protests from landowning lobby groups, local authorities published draft zoning maps in February 2024. That immediately sparked a wave of legal challenges from landowners who objected to their holdings falling under the scope of the tax.
While the final zones are officially recognised as of 1st February this year, and charges accrue thereafter, there are still a number of appeals passing through the legal system, while the government granted permission for further petitions to have land ‘re-zoned’ under specific circumstances in the Finance Bill 2025.
Who will pay RZLT?
Owners of all land that falls under the final residential zones as of 1st February will be liable to pay the tax. The definition of ‘owner’ includes anyone who holds a right to or interest in developing a piece of land.
Land that forms part of an existing residential property or business is excluded from RZLT. A general rule of thumb is, if you pay Local Property Tax or Commercial Rates on a property already, you won’t be liable for RZLT. An exception to this is if a residential property sits in more than one acre of land that is not being used for a permitted business purpose (such as farming). If this is the case, all land in excess of one acre must be registered for RZLT.
If you have any further questions about RZLT and your liabilities to it, of if you would like advice on property development, please contact our team today.
