Inheritance tax thresholds to increase across all categories

INHERITANCE TAX THRESHOLDS are to increase across all categories in Budget 2027.

Inheritance tax, known as Capital Acquisitions Tax (CAT), emerged as a key issue in recent months ahead of the budget, with both Fianna Fáil and Fine Gael pledging to review the current system.

Taoiseach Micheál Martin and Tánaiste Simon Harris have expressed strong views on the inheritance tax system, dubbing it unfair in recent years.

The tax-free threshold for children inheriting from their parents is to increase by €20,000. 

Currently, a child can inherit up to €400,000 from their parents in their lifetime before a tax of 33% kicks in. Budget 2027 will see this threshold increase by €20,000 to €420,000.

There are also increases for inheritances for those less closely related to the deceased. 

Ahead of today’s budget, both government parties signalled they wanted to address concerns raised by people without children, who currently face lower tax-free thresholds when leaving an inheritance to nieces, nephews or other relatives than parents do when passing assets to their children.

The tax-free threshold for Group B, which applies to siblings, nieces, nephews and some relatives, will increase from €40,000 to €44,000.

Meanwhile, it will increase from €20,000 to €22,000 for group C, which includes non-relatives. 

Last year a total of €1,120.5 million was recorded in CAT tax receipts, according to the government’s tax strategy group report in June. 

Inheritance tax has seen significant changes in Ireland following the 2008 financial crisis.

In 2008, people in Group A could inherit over €521,000 tax-free, before a tax of 20% was charged.

Between 2008 and 2012, tax-free thresholds on inheritances were steadily decreased while the rate of CAT was increased.