Ireland has one of the highest inheritance tax in the world. Changes in Inheritance Tax rules commenced in 2009 but it is only now that people are starting to realise the impact this is having as property prices and asset values begin to recover.

The tax bill suffered by beneficiaries can be substantial, depending on 3 main factors:

  • The relationship between the deceased and the beneficiary (this determines the maximum tax-free threshold that applies, i.e. the ‘Group Threshold’)
  • The net/taxable value of the inheritance
  • Any previous gifts or inheritance received.

What many people don’t realise is payment of this tax bill needs to be paid soon after the inheritance. The onus is on the beneficiary to pay it and complete a full tax return. If you do not plan ahead, your family could lose part of their inheritance or be faced with a difficult decision between having to sell part of their inheritance, or borrow the money to pay the tax bill.

If your family is likely to have to pay inheritance tax when you die, it may be a good idea to protect them against this beforehand.

What are the thresholds and CAT tax rate?

Inheritances can be received free from Capital Acquisitions Tax (CAT) up to a certain amount. The tax-free amount varies depending on your relationship to the person giving the gift (group threshold).

There are three different groups. Each group has a threshold that applies to the total value of the inheritances you’ve received, in that group. The current rate of Capital Acquisition Tax is 33%.

Capital Acquisitions Tax Group Thresholds after 14th October 2015