Inheritance Tax
If you’re inheriting a property in Ireland, or planning to pass one on, it’s important to understand how inheritance tax works. Also known as Capital Acquisitions Tax , this can have an impact on what your family receives in the future.
What is Capital Acquisitions Tax?
Inheritance tax is charged when someone receives an inheritance or a large gift. There is a tax-free amount you can inherit before any tax kicks in, which will depend on your relationship to the person giving you the inheritance.
As of October 2024, here are the updated tax-free thresholds:
- Group A – If you inherit from a parent (including adoptive and step-parents): Tax-free up to €400,000
- Group B – If you inherit from a sibling, niece, nephew, or grandparent: Tax-free up to €40,000
- Group C – If you inherit from a cousin, friend, or non-relative: Tax-free up to €20,000
Any amount over these thresholds is taxed at a flat rate of 33%.
Can you reduce or avoid inheritance tax?
Yes you can, and this is where planning ahead can help. There are several exemptions and reliefs that may reduce or cancel the tax:
- Family Home Exemption: If you’ve lived in the house for at least 3 years before inheriting it, and don’t own another property, you might not have to pay tax on it — as long as you keep living there for 6 more years.
- Spouses and Civil Partners: Inheritances between married couples or civil partners are completely tax-free.
- Small Gift Exemption: You can receive up to €3,000 per year from any one person without paying tax — this is often used to gift money during someone’s lifetime, gradually reducing the value of their estate.
- Business & Farm Relief: If you’re inheriting a working farm or business, you may qualify for up to 90% relief, if you keep it running for a certain period.
Property Values and Tax Planning
With rising property prices, more families are being caught by inheritance tax. In fact, the government collected over €850 million in inheritance tax in 2024. While only a small percentage of estates pay tax, it often becomes an issue when a family home or valuable property is involved.
That’s why it’s a good idea to plan ahead, especially if you:
- Are likely to leave property to your children or grandchildren
- Expect to inherit a property
- Own a business or farm you want to keep in the family
- Want to make the most of tax-free gifts while you’re still alive
Inheritance tax can be reduced or avoided with the right advice in many cases. If you’re buying, inheriting, or planning your estate, it’s worth speaking with an advisor or solicitor to make sure everything is in order.
Please contact Tony O’Sullivan or Robin Murray today on 021 490 5000 to discuss Estate Planning for the future.