Written by David Bruton | Updated on - 14/10/2024
Inheritance tax or Capital Acquisitions Tax (CAT) in Ireland is a tax on gifts and inheritances. You may receive gifts and inheritances up to a set value over your life before having to pay CAT. The standard rate for inheritance tax in Ireland in 2025 is 33%.
There is a significant level of inheritance tax in Ireland and the person who receives the gift or inheritance is called the beneficiary. The tax-free exemption amount depends on what group you belong to:
The Group A tax-free threshold is €400,000. This tax-free exemption threshold applies when the beneficiary is a…
The Group B tax-free threshold is €40,000. This tax-free exemption threshold applies when the beneficiary is a...
The Group C tax-free threshold is €20,000 and it applies in all other cases. This includes all the categories not covered above (cousins, great-nephews/ great-nieces and non-relatives).
With careful tax planning, you can reduce the gift or inheritance tax you will pay in 2025. Let's analyse how you can reduce Inheritance tax via the following scenario:
The inheritance consists of:
The Daughter will receive 50% of the inheritance and the Brother 50%. Without any tax planning, each beneficiary will face a tax bill of €181,500 (a total of nearly €400k).
| Daughter | Son | |
| Total Inheritance | €950,000 | €950,000 |
| Child Free Threshold | €400,000 | €400,000 |
| Grandchild Tax-Free Threshold | €80,000 | €120,000 |
| Great Grandchild Tax-Free Threshold | €40,000 | |
| Spouse Tax-Free Threshold | €20,000 | €20,000 |
| Taxable Inheritance | €410,000 | €410,000 |
| Total Tax Bill | €135,300 | €135,300 |
| Net Inheritance | €814,700 | €814,700 |
| Tax saving | €46,200 | €46,200 |
As the parents have reasonably large reserves of cash, they can decide to give a tax-free gift of €3,000 to each child, partner, grandchild, and great-grandchild a year if they plan ahead, for over 10 years and save another €80,000 in inheritance tax savings.
To understand this better, Nathan Trust organised a webinar hosted by David Bruton, Head of Tax at Nathan Trust on the topic "How to reduce your Inheritance Tax in Ireland" in April 2022. Tune in the video to learn in detail about Inheritance tax, the amount you pay, how can you reduce Inheritance tax, and different tax-free threshold situations for individuals.
By being proactive during your lifetime, you have the power to lessen the tax burden on your loved ones. It's important to seek guidance from a tax expert to discover the best strategies for minimising your tax liability. This way, you can ensure that more of your estate goes to your heirs, providing them with greater financial security.
Need help in tax planning?
The inheritance tax you pay in Ireland is dependent on the relationship between the Disponer (person giving the inheritance) and the Beneficiary (person receiving the inheritance).
A late filing surcharge is imposed on returns filed after the due date. This surcharge is calculated as a percentage of the Capital Acquisitions Tax owed for the corresponding year and varies based on how late the return is filed.
For returns filed less than 2 months late, a surcharge of 5% of the tax owed (with a cap of €12,695) is applied.
For returns filed more than 2 months late, the surcharge increases to 10% of the tax owed (with a maximum limit of €63,485).
Additionally, late payments are subject to daily interest charges at specified rates.
| Valuation Period | % Interest due |
|---|---|
| 31 March 1976 to 31 July 1978 | 0.0492% |
| 1 August 1978 to 31 March 1998 | 0.0410% |
| 1 April 1998 to 31 March 2005 | 0.0322% |
| 1 April 2005 to 30 June 2009 | 0.0273% |
| 1 July 2009 to date of payment | 0.0219% |
A lower interest rate is applied when paying by installments for Capital Acquisitions Tax (CAT) owed on agricultural property and relevant business property.
| Valuation Period | % Interest due |
|---|---|
| 8 February 1995 to 31 March 1998 | 0.0307% |
| 1 April 1998 to 31 March 2005 | 0.0241% |
| 1 April 2005 to 30 June 2009 | 0.0204% |
| 1 July 2009 to date of payment |
0.0164% |
As a parent or a grand-parent, you can gift your child or grandchild up to €3,000 a year tax-free. It is important to note that this money must be sent from your bank account to your grandchild's bank account in that year.
There are banking solutions available that allow grandparents to build up a lump sum for their grandchildren tax-free without fully handing over the funds to the grandchild. This could also significantly reduce the inheritance tax and if managed properly give your grandchild a deposit on their first house!
Again, financial planning is vital before you do this.
It's not a fun topic to think about, but inheritance tax is something that could affect you and your family down the road. The only way to reduce the amount of inheritance tax you'll have to pay is by talking about it and putting a plan in place. Here are a few tips on how to start the conversation about Inheritance Tax.
While it can be very difficult to completely avoid inheritance tax in Ireland, with careful planning you should be able to significantly reduce the amount of inheritance tax your beneficiaries end up paying.
When you engage with one of our tax specialists we will be able to see how your set of particular circumstances can be used to reduce your inheritance burden. These can include:
Tune in to this short 1-minute video below where Nathan Trust team members discuss the key questions on Inheritance tax that will help you understand them better.
Nathan Trust helped me with a series of quite complex tax issues, which was very reassuring. My follow-up questions were researched thoroughly and responded to in detail. I would have no hesitation in recommending the tax advisory services.
David Prior - 17th of August, 2023. See Google Review.
No, the 7-year Inheritance tax rule does not apply in Ireland as it does in the UK. Lifetime gifts are not ignored even if the donor survives for seven years after the gift.
Inheritance tax or Capital Acquisitions Tax (CAT) in Ireland in 2024 is 33% of the taxable portion of the inheritance.
| 30-min Consultation with a tax advisor | 1-hour Consultation with a tax advisor |
| €295 incl VAT | €495 incl VAT |
| 1/2-hour call with a chartered tax advisor | 1-hour in-depth call with a chartered tax advisor |
| Discuss your particular set of circumstances and what your intentions are. | Delve into your unique situation and explore your goals within estate planning, legacy creation, and tax optimisation strategies, among others. |
| Receive 1:1 advice on the next steps to reduce your inheritance tax | Obtain personalised, comprehensive guidance on strategies to lower your inheritance tax liability. |
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|
There are many reasons why people might be reluctant to do inheritance planning. Some common reasons include:
Overall, there are many reasons why people might be reluctant to do inheritance planning, and it is important for individuals to consider their own circumstances and decide what is best for them and their families.
Inheritance tax in Ireland for your grandchild falls into Group B - €40,000.
Please note that you must name your grandchild on the will for them to avail of this. If the grandchild is under 18, then the parent is responsible for the distribution of the funds.
In the event that the value of the house is less than the individual's inheritance threshold, then there should be no CAT on the inheritance of the home. For example, if a home is valued at €320,000 and a parent leaves it to an only child, there is no tax liability on the inheritance. This is based on the only child receiving no other gifts or assets that would affect their inheritance threshold.
It is important to remember that CAT is only paid on amounts above the €400,000 threshold.
If the value of the house is above the threshold or brings the individual's inheritance above the threshold, then CAT should be paid. If we look at an example where the family home is valued at €420,000, there would be no tax on the first €400,000. However, there would be CAT due on the remaining €20,000 at a rate of 33% resulting in tax due of €6,600.
Check out our blog on Dwelling House Exemption to see if you are eligible for this.
The information detailed above reflects the latest information, detailing the changes to Inheritance Tax, CGT, or CAT in Budget 2025.
You are required to file form IT38 and pay the Inheritance tax. This can be done online in your Myrevenue account.
You need to complete this form within the tax year you receive the inheritance.
You may qualify for Favourite Nephew or Niece relief if you receive a gift or inheritance of business assets. The relief allows the use of the Group A threshold. This is subject to conditions.
Jargon alert - Disponer: The person who provided the gift or inheritance.
For the purpose of this relief you are a nephew or niece if you are the child of disponers:
You must have worked for the disponer for five years immediately before receiving the gift or inheritance. During these five years, you must have worked for more than:
- 24 hours per week at the place of business or,
- 15 hours per week at the place of business where the business is carried on exclusively by you and either the:
The relief only applies to assets used in the business. Group B threshold applies to non-business assets.
Where the gift or inheritance includes business and non-business assets, liabilities must be apportioned between business and non-business assets.
Yes, they would fall into Group B outlined above. The Group B tax-free threshold is €40,000
The residency of the disponer and the asset are the important concepts here.
The person who is receiving the gift or inheritance is responsible for paying any Capital Acquisitions Tax (CAT) that is due.
It is sometimes hard to talk about Inheritance or money matters with your parents. If you are having a difficult time talking to your parents about inheritance, there are a few things you can do to make the conversation easier.
There is a Revenue-approved life insurance policy called a TA section 72 policy. If certain conditions are met, the proceeds of this policy will not lead to an increase in the beneficiary's Inheritance Tax bill. Instead, it will be used to pay the outstanding Inheritance Tax bill on their other inheritances.
The disponer can pay for the policy.
Take the following example:
Mary and John could take out a Section 72 Insurance policy for €306,900 and this amount would be received tax-free by Eimear to pay her inheritance tax bill.
The term must be for a minimum of 8 years and there cannot be a break in payments.
You must be between 18-74 to start the contract.
Do you want to pay less inheritance tax?
Just get in contact with us and we will walk you through how you can significantly reduce the tax you pay.
| 30-min Consultation with a tax advisor | 1-hour Consultation with a tax advisor |
| €295 incl VAT | €495 incl VAT |
| 1/2-hour call with a chartered tax advisor | 1-hour in-depth call with a chartered tax advisor |
| Discuss your particular set of circumstances and what your intentions are. | Delve into your unique situation and explore your goals within estate planning, legacy creation, and tax optimisation strategies, among others. |
| Receive 1:1 advice on the next steps to reduce your inheritance tax | Obtain personalised, comprehensive guidance on strategies to lower your inheritance tax liability. |
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It tends to be very expensive. There are three main reasons for this.
If you are a tax resident in Ireland but have been born and educated outside of Ireland, then you are probably considered a Non-Dom in Ireland from a tax perspective.
If you inherit cash or assets based in another jurisdiction then there is probably no tax activity unless you decide to bring back some or all of the money into Ireland (if you remit the funds).
If you are not sure what a Non-Dom is, then you should check our Non-Dom page to help figure this out. If you are moving to Ireland from the UK, we have a special guide on the best way to do this.
Some ETFs might also remain outside the inheritance tax net if they are owned by Non-Doms and not domiciled in OECD.
Nathan Trust helped me with a series of quite complex tax issues, which was very reassuring. My follow-up questions were researched thoroughly and responded to in detail. I would have no hesitation in recommending their tax advisory services.
David Prior - 17th of August, 2023. See Google Reviews.
David Bruton is a graduate of Business from the Cork Institute of Technology. He is a Fellow of the Association of Chartered Certified Accountants (ACCA) and a Chartered Tax Advisor (CTA). In addition to dealing with ongoing accounting and tax compliance for clients, David’s areas of expertise also include personal and corporate tax planning, VAT and the international aspects of the Irish tax system. David enjoys trying to take the mystery out of tax for clients.
© Copyright 2024 Nathan Trust. All rights reserved.
Nathan Trust is the trading name for Millex Limited (CRO Number: 314738), is officially registered in Cork, Ireland, and operates under the regulatory oversight of Chartered Accountants Ireland (56679), Chartered Governance Institute (No: 1045242) and the Irish Tax Institute.
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