Updated 2nd October 2024
Inheritance tax in Ireland, also known as Capital Acquisitions Tax (CAT), has been a subject of debate for many years. Discussions around inheritance tax thresholds in Ireland intensified leading up to the recent October 2025 budget, with some politicians pushing for reforms. They argued that the present system was too burdensome, especially on those inheriting family homes.
In Ireland, CAT covers both gifts and inheritances. Many people find it frustrating, as they spend their entire lives paying taxes, only to burden their heirs with another tax bill after their death. This has led to widespread discussion on how much is inheritance tax in Ireland and the potential for easing its financial impact. While it is an onerous aspect of the tax system, inheritance tax remains an unavoidable reality in the country.
A significant focus of Budget 2025 was the inheritance tax threshold in Ireland, particularly concerning family homes when inherited by children. After April 2009, children were allowed to inherit up to €434,000 without having to pay any taxes, and prior to 2008, it was €521,208. However, this threshold was lowered to €335,000 while the rate has increased from 20% to 33% due to the financial crisis. (Revenue.ie)
As part of Budget 2025, the government has responded by raising the inheritance tax threshold for children inheriting from their parents from €335,000 to €400,000. This increase acknowledges the steep rise in property values and aims to ease the financial burden on families. It addresses many concerns that the current inheritance tax threshold in Ireland was no longer sufficient given the soaring property market.
One of the primary drivers of the recent changes has been the sharp rise in property values since 2012. According to the CSO, by then the average house price in Ireland was €205,476 which has hiked to €335,000 today. Dublin’s median home prices range between €410,000-€626,000 (CSO) far above the current CAT threshold.
Politicians have been increasingly aware of the impact of inheritance tax on the so-called “squeezed middle” – those with average or slightly above-average earnings who struggle to get along due to high living costs and significant tax burdens. In this context, inheriting a family home can be a challenge due to the associated tax bill.
Thus some politicians are calling for an increment to CAT threshold to at least €500,000, or even more with a potential increase up to €700,000 along with lowering the CAT rate.
Raising the inheritance tax threshold to €400,000, while keeping the 33% tax rate, is expected to cost the exchequer around €52 million annually. This adjustment offers some relief to families but also brings financial consequences for the government, which is balancing other financial commitments such as tax cuts and public spending increases announced in Budget 2025.
The Minister for Finance, Jack Chambers has limited budget to only €1.4 billion in terms of taxation reductions next year. Most likely these funds will be spent mainly on adjustments of income tax credits and bands so as not to erode workers’ wages through taxation; thus any decrease in inheritance should take into account difficult choices regarding other areas of taxation policy or state expenditure.
Since some people might consider inheritance tax to be a type of wealth tax, they believe that it is necessary to maintain or even increase it. They also argue that property prices have risen significantly over time leading to increased wealth for many people and the majority of individuals do not inherit more than €335,000 hence they pay no CAT. Furthermore, this means that inheritance tax has been accounting for less than 1% of overall net taxes yearly which consequently indicates room for potential expansion in its base.
The introduction of changes on inheritance tax included in the Budget 2025 could resonate with the ‘squeezed middle’ ahead of next year’s general election. Nevertheless, these consequences will come at a financial cost and attract criticism from the public due to other demands from government funds. Therefore, these are complex matters that require making difficult choices by the government.
With these changes in Capital Acquisitions Tax (CAT), it is no wonder that dealing with inheritance tax in Ireland can be a daunting task. Fairstone Ireland specialises in offering professional advice and bespoke solutions on how to effectively manage your estate. Some of our offerings include expert guidance on Section 72 policies covering estate taxes and Section 73 plans, which facilitates saving against future inheritance tax liabilities. Our experienced financial advisors can explain you the advantages along with possible savings or expenditure through these choices thereby protecting your heritage as well as family members against any financial strains.
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