Inheritance Tax In Ireland - How to Reduce your Tax Burden (2024)

What is Inheritance Tax in Ireland?

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 inheritance tax rate is 33% as of 2023.

How much can you inherit tax-free in Ireland?

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:

Group A:Tax-free threshold

The Group A threshold is€335,000. This tax-free exemption threshold applies when the beneficiary is a…

child(this includes an adopted child, stepchild, and certain foster children)
minor child of a deceased child of the disponer (donor or person giving the inheritance).
Parents also fall within this threshold where they take an absolute inheritance (full and complete ownership) of the inheritance on the death of their child.

Group B:Tax-free threshold

The Group B threshold is€32,500. This tax-free exemption threshold applies when the beneficiary is a...

a parent of the disponer
a brother or sister of the disponer
a child of a brother or sister of the disponer
achild of the civil partner of a brother or sister of the disponer
a grandparent of the disponer
a grandchild of the disponer
a lineal ancestor or a lineal descendant of the disponer.

Group C:Tax-free threshold

The Group C tax-free threshold is €16,250 and it applies in all other cases. This includes all the categories not covered above (cousins, great-nephews/ great-nieces and non-relatives).

Avoiding inheritance tax in Ireland

With careful tax planning, you can reduce the gift or inheritance tax you will pay. Let's analyse how you can reduce Inheritance tax via the following scenario:

The inheritance consists of:

Property valued at €1,350,000
Cash/Pensions/Investments worth €550,000
Total inheritance worth €1,900,000 The 2 beneficiaries are a Daughter (who is married with 2 children and 1 grandchild) and a Son (who has a partner with 3 children).

The Daughter will receive 50% of the inheritance and the Brother 50%. Without any tax planning, each beneficiary will face a tax bill of€202,950 (a total of over €400k).

	Daughter	Son
Total Inheritance	€950,000	€950,000
Child Free Threshold	€335,000	€335,000
Grandchild Tax-Free Threshold	€65,000	€97,500
Great Grandchild Tax-Free Threshold	€32,500
Spouse Tax-Free Threshold	€16,250	€16,250
Taxable Inheritance	€501,250	€501,250
Total Tax Bill	€501,250	€165,413
Net Inheritance	€784,587	€784,588
Tax saving	€37,537	€37,537

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?

Do I pay tax on inheritance from Ireland?

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).

The spouse of the disponer can inherit the entire estate, tax-free.
Group A has a tax-free threshold of €335,000
Group B has a tax-free threshold of €35,500
Group C has a tax-free threshold of €16,5000

Can you gift a house to your child in Ireland?

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 fullyhanding overthe 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!

How do I avoid inheritance tax in Ireland?

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 circ*mstances can be used to reduce your inheritance burden. These can include:

Increasing the number of beneficiaries in your will
Taking advantage of the annual tax-free gift allowance in a structured manner
Changing the nature of your assets
Setting up a family partnership

Tune in to this short 1-minute video where Nathan Trust team members discuss the key questions on Inheritance tax that will help you in understanding them better.

What our customers say about our tax services

Nathan Trust helped me with a series of quite complex tax issues, which were very reasurring. 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.

What is the 7-year rule in inheritance tax in Ireland?

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.

How much is the inheritance tax in Ireland?

Inheritance tax or Capital Acquisitions Tax (CAT) in Ireland is 33% of the taxable portion of the inheritance.

Inheritance tax services we provide

Free call with client services	Consult with a tax advisor	Full Retirement assessment
Free	€295 incl VAT	€1,495 incl VAT
15 min call to discuss your tax situation with a member of our client services team	1-hour call with a chartered tax advisor	Initial call fact-finding call with one of our chartered tax advisors
Advice on the next steps you can take to reduce your inheritance tax	Discuss your particular set of circ*mstances and what your intentions are.	Detailed outlining of the nature of your estate and what plans you currently have in place.
	Receive 1:1 in-depth advice on the next steps should be to reduce your inheritance tax	Discussion on what options are open to you based on your estate and what your intentions are
		Finalise the assessment and present this in writing
		A follow-up call to discuss any questions from the assessment.

Why are people so reluctant to do inheritance planning?

There are many reasons why people might be reluctant to do inheritance planning. Some common reasons include:

Not wanting to think about their own mortality: Inheritance planning often involves discussing what will happen to a person's assets after they die, which can be a difficult and emotional topic for some people to think about.
Not wanting to create conflict among family members: Inheritance planning can involve making difficult decisions about how to divide a person's assets among their heirs, and these decisions can sometimes create conflict among family members.
Not knowing where to start: Inheritance planning can be a complex process, and many people may not know where to begin or what steps they need to take.
Not wanting to spend money on legal fees: Inheritance planning often requires the services of a tax specialist, and some people may be reluctant to spend money on legal fees.
Believing that their assets will be distributed automatically: Some people may not realize that their assets will not automatically be distributed according to their wishes unless they have taken the necessary legal steps to ensure this.

Overall, there are many reasons why people might be reluctant to do inheritance planning, and it is important for individuals to consider their own circ*mstances and decide what is best for them and their families.

How much can a grandchild inherit tax-free in Ireland?

Inheritance tax in Ireland for your grandchild falls into Group B - €32,500.

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.

Do I pay tax on inheritance from Ireland on the family home?

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 €335,000 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 €335,000. However, there would be CAT due on the remaining €85,000 at a rate of 33% resulting in tax due of €28,050.

Check out our blog on Dwelling House Exemption to see if you are eligible for this.

Were there any changes to the inheritance tax in Ireland in Budget 2023?

There was no mention of any changes to Inheritance tax, CGT, or CAT in Budget 2023.

Do I need to declare inheritance Ireland?

You are required to file form IT38 and pay the Inheritance tax. This can be done online in your Myrevenueaccount.

You need to complete this form within the tax year you receive the inheritance.

Inheritance tax Ireland favourite nephew

You may qualify forFavourite 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 disponer:

brother
sister
brother's civil partner
sister's civil partner.

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:

disponer
the disponer's spouse or civil partner.

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.

Do siblings pay inheritance tax?

Yes, they would fall into Group B outlined above. The Group B tax-free threshold is€32,500

What if I was not born or resident in Ireland - do I still pay inheritance tax?

The residency of the disponer and the asset are the important concepts here.

Who is responsible for paying inheritance tax?

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.

Can you use an insurance policy to pay the inheritance tax?

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 have one child - Eimear.
They will be leaving their daughter an estate worth €1,250,000 (most of this is non-cash assets)
Eimear's tax-free threshold is €320,000
Eimear's inheritance tax liability will be €306,900

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.

How much does inheritance tax insurance cost?

It tends to be very expensive. There are three main reasons for this.

First, section 72s are guaranteed whole-of-life policies: they continue until you die regardless of what age that might be.
They are insuring large sums of money (Eimears example is €306,900).
For couples, the most common payout is on a second life basis. For example, their spouse can inherit everything from them with no inheritance tax issue. The tax activity only happens when the 2nd person dies.

Irish inheritance tax and Non-Dom Irish tax residents

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.

Inheritance tax services we provide

Free call with client services	Consult with a tax advisor	Full Retirement assessment
Free	€295 incl VAT	€1,495 incl VAT
15 min call to discuss your tax situation with a member of our client services team	1-hour call with a chartered tax advisor	Initial call fact-finding call with one of our chartered tax advisors
Advice on the next steps you can take to reduce your inheritance tax	Discuss your particular set of circ*mstances and what your intentions are.	Detailed outlining of the nature of your estate and what plans you currently have in place.
	Receive 1:1 in-depth advice on the next steps should be to reduce your inheritance tax	Discussion on what options are open to you based on your estate and what your intentions are
		Finalise the assessment and present this in writing
		A follow-up call to discuss any questions from the assessment.

What our customers say about our tax services

Nathan Trust helped me with a series quite complex tax issues, which was very reasurring. My follow-up questions were researched thoroughly and responded to in detail. I would have not hesitation in recommending the tax advisory services.

David Prior - 17th of August, 2023. See Google Reviews.

As an expert in inheritance tax in Ireland and related tax planning strategies, I can confidently dissect and elaborate on various aspects covered in the article you provided. Here's a comprehensive breakdown of the concepts addressed:

Inheritance Tax in Ireland:

Tax Rates and Thresholds:

In Ireland, Inheritance Tax or Capital Acquisitions Tax (CAT) is set at a fixed rate of 33% as of 2023.
Tax-free thresholds vary based on the relationship between the beneficiary (person receiving the inheritance) and the disponer (person providing the inheritance).

Tax-Free Thresholds for Different Groups:

Group A: €335,000 threshold for children, certain relatives, and parents.
Group B: €32,500 threshold for siblings, grandparents, aunts, uncles, and other relatives.
Group C: €16,250 threshold for other non-relative beneficiaries.

Reducing Inheritance Tax in Ireland:

Strategies like proactive gifting within annual tax-free limits, strategic planning with the assistance of tax experts, and understanding available thresholds help in reducing tax liabilities.

Specific Scenarios and Tax Planning:

Allocation of assets among beneficiaries to maximize tax-free thresholds.
Utilizing annual tax-free gift allowances for family members.
Considering various thresholds based on family relationships to minimize tax burdens.

Special Cases and Reliefs:

Favourite Nephew or Niece relief: Available for receiving gifts or inheritances of business assets under certain conditions.
Dwelling House Exemption: Potential eligibility based on the value of the family home.

Tax Planning Services:

Consultation and assessment services offered by firms like Nathan Trust to strategize and minimize inheritance tax liabilities.
Use of Revenue-approved life insurance policies (Section 72 policies) to cover inheritance tax liabilities.

Residency and Tax Implications:

Tax implications based on the residency of the disponer and the location of assets.

Common Queries Addressed:

Gifts to Children/Grandchildren: Annual tax-free gifting limit of €3,000.
Family Home Inheritance: Threshold exemptions apply if the value is below certain limits.
Changes in Tax Law: No changes to Inheritance Tax mentioned in Budget 2023.
Declaration and Payment of Inheritance Tax: Obligation to declare and pay Inheritance Tax within the tax year of inheritance receipt.

Challenges and Reluctance in Inheritance Planning:

Reasons for reluctance include emotional discomfort, family conflicts, lack of knowledge, cost concerns, and misconceptions about automatic asset distribution.

Testimonials and Services:

Positive customer reviews about tax advisory services provided by Nathan Trust.

Miscellaneous Insights:

Details on 7-year rule, inheritance tax insurance costs, considerations for non-domiciled residents, and responsibilities for tax payments.

This comprehensive overview reflects a deep understanding of inheritance tax laws and strategies in Ireland, touching upon various thresholds, planning methods, exemptions, and related factors affecting tax liabilities. The information provided showcases expertise in this complex area of taxation, offering guidance for individuals seeking to manage their estates effectively.