When a loved one passes away, dealing with their estate can be an emotional and complex process. One of the key aspects to consider is inheritance tax. In Ireland, this tax is officially known as Capital Acquisitions Tax (CAT). Understanding how inheritance tax in Ireland works, how much you can inherit tax-free, and how to calculate your potential liability can save you both time and money.
In this comprehensive guide, we will explain what inheritance tax is, how it’s calculated, what the inheritance tax thresholds are, and recent inheritance tax changes introduced in Budget 2025.
Inheritance tax is the tax paid on the value of property, money, or assets that you inherit when someone dies. In Ireland, this tax is known as Capital Acquisitions Tax (CAT).
The inheritance tax rate in Ireland for 2025 remains at 33%, which applies to the portion of an inheritance that exceeds the tax-free thresholds.
Capital Acquisitions Tax applies to:
If you inherit any of the above and exceed the inheritance tax threshold, you are liable to pay CAT at 33%.
A gift becomes an inheritance if the disponer dies within two years of giving it.
Unlike some countries where inheritance tax is paid by the estate, inheritance tax in Ireland is paid by the beneficiary.
You may be liable for Irish CAT if:
If you fall into either of these categories, you will need to calculate your tax liability and make the necessary arrangements to pay the tax.
It must be paid by 31st October of the year following the inheritance if the valuation date falls between 1st September of the previous year and 31st August of the current year.
Late payments are subject to interest charges and penalties.
You will need to file Form IT38 to declare the inheritance and pay your tax liability through Revenue’s myAccount or ROS (Revenue Online Service).
The Current Rate: 33%
The inheritance tax rate in Ireland has been set at 33% since 2012, and this remains the standard rate in 2025. However, you are only taxed on the amount above the applicable tax-free threshold.
For example, if you inherit €500,000 from a parent and your applicable inheritance tax threshold is €400,000, you would only pay tax on €100,000. The inheritance tax would be €33,000 (33% of €100,000)*.
The amount you can inherit tax-free depends on your relationship with the deceased. These amounts are called thresholds and they are grouped as follows:
If you receive €100,000 from an uncle:
As of October 2024, inheritance tax thresholds have been increased:
This means more inheritance is tax-free than before, offering some relief to beneficiaries.
Click here to read more about Inheritance Tax Threshold in Ireland: A Key Issues in 2025’s Budget
Certain inheritances are exempt from inheritance tax altogether, including:
1. Spouse or Civil Partner: Gifts or inheritances between spouses or civil partners are fully exempt.
2. Dwelling House Exemption: If you inherit a house under certain conditions, you may qualify for full exemption from CAT. Conditions include:
3. Parental Exemption: If a child dies having previously received a taxable inheritance from a parent within the last 5 years, the parent may be exempt from CAT.
When it comes to Capital Acquisitions Tax (CAT), it’s important to understand that your tax-free thresholds are lifetime limits. This means that any gifts or inheritances you have previously received from the same person (the “disponer”) will reduce the available threshold for future gifts or inheritances from that person.
If you receive a gift of €100,000 from your parent during their lifetime, and the Group A threshold is €400,000, then the remaining threshold available for an inheritance from that parent would be €300,000. Anything above that amount would be subject to CAT at 33%.
It’s not just inheritances that fall under CAT, gifts are included too. Both are treated as benefits for the purposes of the lifetime threshold. This is an essential point to remember if you’ve been receiving significant financial gifts from family members.
However, there is a small gift exemption you can take advantage of. You can receive up to €3,000 per year, per person completely tax-free, and this amount doesn’t count towards your lifetime threshold.
For example, if your parent gives you €3,000 each year for 10 years, you receive €30,000 tax-free, without reducing your €400,000 Group A threshold.
Inheritance tax planning can be complex, and calculating your exact tax liability should always be done with the help of a qualified tax advisor or accountant. They can guide you through the specific tax rules, exemptions, and filing requirements.
Once you’ve received tax advice, a financial planner can help you structure your finances, recommend strategies to reduce future liabilities, and support your long-term financial goals.
At Fairstone, we offer financial planning tailored to your needs and work alongside your chosen tax advisor to help ensure your wider financial plan is working for you. Book a no-obligation financial planning consultation with us today and secure your financial future with confidence.
Source: Revenue.ie
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Inheritance Tax Threshold in Ireland: A Key Issue in 2025’s Budget
Budget 2025: Key Announcements and Implications for Ireland
This article does not constitute tax advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional, independent tax advice. Although endeavours have been made to provide accurate and timely information of the various source material, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.
Inheritance tax, 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 and the potential for easing its financial impact. While it is an onerous aspect of the tax system, it remains an unavoidable reality in the country.
A significant focus of Budget 2025 was the inheritance tax threshold, 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 system 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. This rise has also sparked questions about how the Irish inheritance tax system affects property ownership and family wealth.
Politicians have been increasingly aware of the impact of taxes 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.
Some politicians are calling for an increment to the CAT threshold to at least €500,000, or even more, with a potential increase up to €700,000 along with lowering the CAT rate. These proposals reflect the need for inheritance tax threshold changes in response to the growing pressures on middle-income families.
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, Irish inheritance tax accounts for less than 1% of overall net taxes yearly, indicating room for potential expansion in its base.
The introduction of these changes 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 CAT, it is no wonder that dealing with inheritance tax 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. Book today your no-obligation estate planning consultation.
Updated 2nd October 2024
Sources:
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Budget 2025 Key Announcements and Implications for Ireland
