What is inheritance tax (Capital Acquisitions Tax) in Ireland?
When someone passes away and leaves assets to their family or friends, the people who receive those assets may have to pay a tax called Capital Acquisitions Tax (CAT). This is what most people in Ireland mean when they talk about "inheritance tax."
It is important to understand that CAT works differently from the inheritance tax model used in the United Kingdom. In the UK, the tax is levied on the estate itself before it is distributed. In Ireland, the tax is paid by the person who receives the inheritance, not by the estate. This distinction matters because the amount of tax each beneficiary pays depends on their individual relationship to the person who has died and how much they have already received from that person over their lifetime.
The current rate of CAT in Ireland is 33%. That rate applies to the value of the inheritance (or gift) that exceeds the relevant tax-free threshold. So if you inherit assets worth more than your threshold, you pay 33% on the excess. If the inheritance falls within your threshold, you owe nothing.
CAT applies to both inheritances (received after someone dies) and gifts (received while someone is alive). The thresholds are cumulative, meaning that all gifts and inheritances you have received from people in the same group category since 5 December 1991 are added together when calculating whether you have exceeded your threshold.
2026 CAT thresholds: Group A, Group B, and Group C
The tax-free thresholds depend on the relationship between the person giving the assets and the person receiving them. There are three groups:
Group A: children (threshold EUR 400,000)
Group A applies where the beneficiary is a child of the person who has died (or made the gift). This includes adopted children, stepchildren and, in certain circumstances, foster children. It also applies to a parent who inherits from a child, but only where the parent takes a full and absolute interest in the inheritance. A gift from a child, or a limited interest such as a life interest, falls under Group B instead.
This means that a child can inherit up to EUR 400,000 from their parents over their lifetime without paying any CAT. Anything above that amount is taxed at 33%.
There is also a complete exemption worth knowing about: where a child had received a taxable gift or inheritance from either parent within the five years before the child's death, an inheritance taken by a parent from that child is entirely exempt from CAT, regardless of its value. A parent claiming this exemption must still file a CAT return.
Group B: siblings, nieces, nephews, grandparents, grandchildren, and parents (threshold EUR 40,000)
Group B applies to brothers, sisters, nieces, nephews, grandparents, grandchildren, and parents receiving a gift, or an inheritance that is not a full and absolute interest (for example, a life interest). The tax-free threshold is EUR 40,000. This is significantly lower than the Group A threshold, which catches many families off guard. A grandparent leaving a substantial sum to a grandchild, for example, may trigger a considerable tax bill. One exception applies to grandchildren: a grandchild who is under 18 and whose parent (the child of the person who has died) has already died qualifies for the Group A threshold.
Group C: everyone else (threshold EUR 20,000)
Group C covers all other relationships, including friends, cousins, and unmarried partners. The threshold is just EUR 20,000, which means even relatively modest inheritances from people outside the immediate family can attract CAT.
A worked example
Consider a straightforward scenario. A parent dies and leaves the family home, valued at EUR 450,000, to their only child. The child has not previously received any gifts or inheritances from their parents.
- Value of inheritance: EUR 450,000
- Group A threshold: EUR 400,000
- Taxable amount: EUR 450,000 minus EUR 400,000 = EUR 50,000
- CAT at 33%: EUR 16,500
The child would owe EUR 16,500 in Capital Acquisitions Tax. This is a significant sum, and it needs to be paid regardless of whether the child intends to keep the property or sell it. If the child does not have the cash available, they may need to sell the property or take out a loan to pay the tax bill.
Now consider a second example. The same parent also leaves EUR 50,000 to their niece. The niece falls under Group B:
- Value of inheritance: EUR 50,000
- Group B threshold: EUR 40,000
- Taxable amount: EUR 10,000
- CAT at 33%: EUR 3,300
Even a relatively modest inheritance can result in a meaningful tax obligation when the thresholds are lower.
Gifting assets during your lifetime: how CAT treats gifts
You may have come across a "7-year rule", under which a gift escapes inheritance tax if the giver survives for seven years after making it. That is a UK rule, and it has no equivalent in Ireland. For CAT purposes, all gifts and inheritances a beneficiary receives within the same group since 5 December 1991 are added together no matter when they were made, and a gift above the tax-free threshold is taxable when it is received.
Lifetime gifts can still play a useful role in estate planning, but through the exemptions and reliefs that Irish law actually provides, starting with the small gift exemption. One timing rule is worth knowing: if the person making a gift dies within two years of making it, the gift is treated as an inheritance instead.
The small gift exemption
The small gift exemption allows you to give up to EUR 3,000 to any person in any calendar year without it being counted for CAT purposes at all. This exemption applies per recipient, so a couple with three children could give EUR 3,000 each to each child every year, transferring EUR 18,000 per year completely free of CAT. Over ten years, that amounts to EUR 180,000 transferred entirely outside the CAT system. Combined with the Group A threshold, this can significantly reduce the eventual tax bill on your estate.
The exemption applies to gifts, not to inheritances taken on death. If the giver dies within two years of making a gift, the gift is treated as an inheritance for CAT — but the small gift exemption is specifically preserved for gifts caught by this two-year rule.
A word of caution
While gifting can be an effective strategy, it is not a substitute for proper estate planning. You still need a will to deal with the assets that remain in your estate, to appoint guardians for minor children, to name executors, and to make provision for charitable bequests or other wishes. A solicitor can help you structure both your gifts and your will to achieve the best outcome for your family. You can read our guide on why every adult in Ireland needs a will for more on this.
How a well-drafted will helps manage inheritance tax
Many people assume that tax planning is only relevant for the very wealthy. In reality, with Irish property prices where they are today, a family home in Dublin alone can push an estate above the Group A threshold. Careful will drafting can make a meaningful difference to the amount of tax your beneficiaries pay.
Structuring bequests to use thresholds efficiently
A solicitor can help you structure your will so that assets are distributed across beneficiaries in a way that makes the most efficient use of each person's tax-free threshold. For example, rather than leaving everything to one child, you might distribute assets among several family members, ensuring that each stays within or closer to their threshold.
The dwelling house exemption
One of the most valuable reliefs available is the dwelling house exemption. If certain conditions are met, the property may be entirely exempt from CAT. The exemption applies to inheritances. A gift of a home qualifies only where the recipient is a dependent relative of the person making the gift (or of their spouse or civil partner), meaning a relative who is permanently and totally incapacitated and unable to maintain themselves, or who is aged 65 or over at the date of the gift. For an inheritance, Revenue requires all of the following conditions to be satisfied:
- The beneficiary must have lived in the property as their only or main home for at least three years immediately before the inheritance.
- The beneficiary must continue to live in the property as their only or main home for at least six years after the inheritance. This condition does not apply where the beneficiary is aged 65 or over at the date of the inheritance, and there are further exceptions where they are required to live elsewhere because of their employment, or because of a mental or physical infirmity certified by a doctor.
- The beneficiary must not own, or have an interest in, any other residential property at the date of the inheritance.
- The property must have been the only or main residence of the disponer — the person who has died — at the date of their death (this condition does not apply where the beneficiary is a dependent relative, or where the disponer had been unable to live there due to ill health or long-term care).
- The beneficiary must not acquire an interest in any other dwelling from the same disponer between the date of the inheritance and the valuation date.
This relief can save a beneficiary tens or even hundreds of thousands of euro in tax.
However, the rules are strict and the conditions must be met precisely. A properly drafted will, prepared with professional advice, can help ensure that the conditions for the dwelling house exemption are satisfied.
Agricultural and business relief
If your estate includes agricultural property or a business, there are additional reliefs that can reduce the taxable value of those assets by up to 90%. Agricultural relief applies where the beneficiary is a "farmer" (meaning at least 80% of their total assets after the inheritance consist of agricultural property). The beneficiary must also satisfy an active farmer test: they must farm the property on a commercial basis for at least six years from the valuation date, or lease it to someone who does, and the person farming must either hold a recognised farming qualification or farm for at least half of their normal working hours. If these conditions stop being met within that six-year period, the relief is clawed back. Business relief applies to relevant business property, including shares in trading companies.
Budget 2025 announced an additional condition that would require the disponer (the person passing on the property) to have met an active farmer test themselves. That change has not yet been brought into force: it is subject to a ministerial commencement order which, at the time of writing, has not been signed, so agricultural relief continues to operate under the existing conditions.
These reliefs are powerful but have specific conditions that must be met. Generic online will-writing services typically do not provide the legal advice needed to structure bequests to qualify for these reliefs. Working with an experienced solicitor ensures your will is drafted to take full advantage of the tax-saving opportunities available to your family.
Why generic online wills miss these opportunities
Online will-writing services offer convenience and low cost, but they cannot provide legal advice tailored to your circumstances. They do not analyse your estate's value against the current thresholds, they do not consider the dwelling house exemption or agricultural and business relief, and they do not structure bequests to minimise tax. For families with assets above the Group A threshold, the savings from professional advice far outweigh the cost of having a solicitor prepare your will. Our guide to the cost of making a will in Ireland breaks down what you can expect to pay.
Other reliefs and exemptions worth knowing about
Spouse and civil partner exemption
Inheritances and gifts between spouses or civil partners are completely exempt from CAT. There is no threshold and no limit. This means you can leave your entire estate to your spouse or civil partner without any tax liability. However, this simply defers the tax question to the next generation. When the surviving spouse dies, the estate passes to the children under Group A thresholds, so proper planning at both stages is important.
Favourite nephew or niece relief
In certain circumstances, a nephew or niece who has worked in the family business for the five years immediately before receiving a gift or inheritance may qualify for the Group A threshold instead of the Group B threshold. The work requirement is more than 24 hours per week, reduced to more than 15 hours per week where the business is carried on exclusively by the disponer, their spouse or civil partner, and the nephew or niece. Importantly, the Group A treatment applies only to the assets used in the business itself: any non-business assets in the same gift or inheritance remain subject to the Group B threshold. This can be a significant benefit for family-run businesses and farms. Specific conditions apply, and professional advice is essential to determine eligibility.
Revenue self-assessment
If you receive an inheritance or gift that exceeds 80% of the relevant Group threshold, you are required to file a CAT return with Revenue, even if no tax is due. A return is also required whenever agricultural relief or business relief is claimed, regardless of the value of the property involved. Many people are unaware of these obligations. Failure to file can result in penalties and interest.
Practical steps: what should you do now?
If you have assets above the Group A threshold, or if you want to ensure your family pays as little inheritance tax as possible, the first step is to speak to a solicitor. A professional review of your estate and your will can identify opportunities for tax savings that you may not have considered.
At Coyne Solicitors, we prepare wills from EUR 369 for individuals and EUR 615 for couples, with transparent fixed fees and no hidden charges. From our offices in Lucan, west Dublin, our team can advise you on estate planning, the dwelling house exemption, agricultural and business relief, and how to structure your will to protect your family from unnecessary tax bills.
You do not need to have a complex estate to benefit from professional advice. Even a straightforward will, properly drafted, can save your family thousands of euro. Learn more about our wills service or find out about probate and estate administration.
If you have any questions about inheritance tax or estate planning, do not hesitate to get in touch.
