Inheritance Tax in Ireland: CAT Thresholds and Planning Tips

Inheritance and gift tax in Ireland is called Capital Acquisitions Tax (CAT), and it is charged at 33%. How much you can receive tax-free depends on your relationship to the person giving it to you: €400,000 from a parent (Group A), €40,000 from other close relatives (Group B), and €20,000 from anyone else (Group C).

What is Capital Acquisitions Tax (CAT)?

CAT is the tax on gifts and inheritances you receive during your lifetime and after someone dies. It applies to the person receiving the gift or inheritance (the beneficiary), not to the estate of the person who has died. You pay CAT once your total lifetime benefits from a particular group exceed the tax-free threshold for that group.

CAT thresholds and rate

Any amount received above your threshold is taxed at 33%. The thresholds are lifetime amounts — they cover everything you have received from everyone in that group, so it pays to keep track of cumulative gifts and inheritances.

Gifts and inheritances that are exempt from CAT

• Transfers between spouses and civil partners — fully exempt.
• The first €3,000 from any person in a calendar year (the small gift exemption).
• A principal private residence in many cases (the dwelling house exemption, subject to conditions).
• Certain lottery, gambling and compensation payments.

Reliefs that can reduce CAT

• Agricultural relief — a 90% reduction on the value of agricultural property for qualifying farmers.
• Business relief — a 90% reduction on relevant business property, subject to conditions.
• Dwelling house exemption — a home you inherit and live in can be exempt if the conditions are met.
• Section 72 life assurance policies, which can be arranged to fund the eventual tax bill.

7 planning tips to reduce inheritance tax

1. Gift early — the thresholds are lifetime limits, so transferring assets sooner lets beneficiaries use their allowance over time.
2. Use the €3,000 annual small gift exemption every year — it is per donor, per recipient.
3. Leave the family home to a child who has lived in it to potentially qualify for the dwelling house exemption.
4. Pass on the farm or business to a qualifying successor to claim 90% agricultural or business relief.
5. Take out a Section 72 life assurance policy so the tax is funded without having to sell assets.
6. Keep records of all gifts and inheritances received, because the thresholds are cumulative.
7. Get professional advice before making large transfers — the rules are strict and mistakes are expensive.

Inheritance tax can be reduced significantly with planning, but the rules are strict and the thresholds are cumulative. Talk to Bradán Accountants before making gifts or writing your will — we will help you structure things so more of your wealth stays with the people you care about.

Sources

• Revenue.ie – Capital Acquisitions Tax (CAT)
• Revenue.ie – CAT group thresholds
• Citizens Information – Capital Acquisitions Tax