Inheritance Tax in Ireland

Capital Acquisitions Tax (CAT) is sometimes also known as Inheritance Tax in Ireland.

Capital Acquisitions Tax is a tax charged on money or property that is gifted to, or inherited by, someone.
Some people also refer to it as Gift Tax or Inheritance Tax.
In Ireland – the recipient is responsible for the tax on the gift or inheritance. This is different to the UK, where the estate of the deceased is liable for the tax .

This tax applies to all property that is located in Ireland.

CAT also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it is resident or ordinarily resident in Ireland for tax purposes.
(More details later on double tax treaties for USA and UK inheritances.)

• The current rate of inheritance tax in Ireland in 2023 is 33%.

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How Much Can You Inherit Tax-Free?

Inheritance Tax Thresholds in Ireland

The thresholds were not altered in the Budget 2023 – so these thresholds continue to apply in 2023.
We do not expect any changes to inheritance tax in Budget 2024.

Inheritances or gifts under certain thresholds are tax-free.

There are 3 different threshold levels or groups, depending on the relationship between the recipient and the donor (disponer) of the gift or inheritance.

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Group A: Tax-free threshold

The Group A tax-free threshold for inheritance tax in 2023 is  €335,000 . This applies where the beneficiary is a…

• child (including an adopted child, stepchild and certain foster children) OR
• minor child of a deceased child of the disponer (donor).
  
• Parents also fall within this threshold where they take an absolute inheritance (full and complete ownership)  from a child.(not a gift) and the inheritance is taken on the death of the child. Otherwise, parents fall into Group B. (see below)

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Group B Tax-Free Threshold

The Group B tax-free threshold in 2023 is €32,500. This applies where the beneficiary is a …

• brother or sister
• nephew or niece
• lineal ancestor or lineal descendant of the disponer  (eg grandchild).

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Group C Tax-Free Threshold

The Group C tax-free threshold in 2023 is  €16,250 and it applies in all other cases. This includes cousins, great-nephews/ great-nieces and non-relatives.

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Inheritance Tax Calculation – Some Examples

Example 1 :  A son inherits a house valued at €415,000 from a parent.
This is €80,000 over the Group A threshold of €335,000 .
Therefore the tax bill would be 33% of €80,000 which is  €26,400

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Example 2 :  Two children inherit a house worth €830,000.
The total inheritance tax threshold for both children (Group A) – is €335,000 times two – ( €670,000).
With 33% tax on the remaining €160,000 house value, this would result in an inheritance tax bill of €52,800 in total or €26,400 per child.

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Example 3 :  A great-nephew inherits a house worth €200,00. The tax-free threshold (Group C) is just €16,250. The amount liable for CAT/ Inheritance Tax is 200,000 minus €16,250 =€183,750.
The inheritance tax will be 33% of €183,750 – which is €60,637.

Example 4 :  A nephew inherits a house worth €200,00. The tax-free threshold (Group B) is just €32,500. The amount liable for CAT/ Inheritance Tax is 200,000 minus €32,500 =€167,500.
The inheritance tax will be 33% of €167,500 – which is €55,275.

Inheritance tax can sometimes result in relatives who inherit property having to sell the property to pay the inheritance tax.

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Lifetime Inheritance Tax Thresholds

You pay CAT or Inheritance Tax on the total of all the gifts or inheritances that you have received throughout your lifetime.
To calculate the CAT on the latest benefit or inheritance, you need to add all inheritances or gifts received under the same group threshold from 5 December 1991.
So for example -a nephew receives a €22,500 inheritance in 2002. They have €10,000 of their €32,500 threshold left.
If the same nephew gets a €20,000 inheritance from another uncle in 2023 – the “leftover” €10,000 from the first inheritance will apply. The tax will only be charged on €10,000 of the €20,000.
More details here

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Gifts of €3000 a year are Exempt From Capital Acquisitions Tax

Capital Acquisitions Tax/Gift Tax legislation in Ireland allows for an exemption for the first €3,000 of any gift taken by a beneficiary from any one donor. This is an annual exemption, which means that a beneficiary can receive up to €3,000 tax-free in any one year from any donor, or even multiple donors and this gift will not impact their tax-free lifetime threshold for Inheritance.

So a possible way to avoid some inheritance tax for your children would be for each parent to gift them €3000 each year. (Total €6000 a year.) Of course, you need to make sure you have enough savings to survive on. It might be more rewarding to give money to your children while you are still alive and can see the benefits of it rather than wait till after you die.

(Note – in the UK all gifts are exempt from inheritance tax after seven years have expired.)

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Inheritance Tax Exemptions in Ireland

1. All Gifts or inheritances from a spouse or civil partner are exempt from inheritance tax in Ireland.
2. You can avoid inheritance tax (CAT) on a house you inherit – if ALL of the following apply:

• the house was the only or main home of the person who died
• you lived in the house as your main home for the 3 years before the person’s death.
•  you do not own, or have an interest or a share in any other house, including one you acquired as part of the same inheritance.
• the house remains your main home for six years after you receive the inheritance. (This does not apply if you are over 65.) More details here

3. Parents taking an absolute inheritance  (full ownership ) from a child have a Group A threshold. However, if the child took a non-exempt gift or inheritance from either parent in the previous five years, any inheritance taken by a parent from that child is exempt.

• Example : Philip received a gift of £10,000 from his mother in 2015. Philip dies in 2023 and leaves his entire estate of £1,000,000 to his father. The inheritance taken by the father is exempt from CAT.

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Inheritance and Large Currency Transfers

If you live in Ireland and have inherited a large sum of money in another country  – you will probably need to transfer that money into Euros.
Conversely, if you have inherited a lump sum of money in Ireland and you live elsewhere, you may also need to convert the Euros to your home currency and transfer it to a bank in your home country.

You should take a look at our page on Transferring Money – Where to Get the Best Exchange Rates

One other option is a multi-currency account from WISE . (Formerly known as Transferwise)
It allows you to accept bank transfers in your name in several currencies including USD, AUD, CAD, GBP and EUR.
You just need to give your WISE Euro or USD or GBP account details to the Executor or solicitor so they can pay you. Once you receive your inheritance payment you can easily convert it online to your home currency using WISE and transfer it to your main bank account.
WISE is authorised in the EU ,UK, USA, Canada, Australia and New Zealand .

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Filing a CAT / Inheritance Tax Return

If the total taxable value of your gifts and inheritances exceeds 80% of the relevant group threshold, you must file an IT38 return on Revenue Online Service (ROS)

This obligation applies even though you may not have a Capital Acquisitions Tax (CAT) liability.  

To calculate if you have reached 80% of the threshold, you need to include all gifts and inheritances received since 5 December 1991.

More details on It38 at Revenue

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Payment of CAT / Inheritance Tax

When Does Irish Inheritance Tax Have to Be Paid ?

All gifts and inheritances with a valuation date in the 12-month period ending on 31 August must be paid and filed by 31st October of that year.

That means that if you inherit between January and August, you have to pay by October 31st of the same year.
If you inherit between September and December, you won’t have to pay the inheritance tax bill until 31st October in the following year.

If you receive a gift or inheritance, then you are responsible for paying any Capital Acquisitions Tax.
However, If you are not resident in Ireland, you must get an agent who is resident in Ireland, such as a solicitor, to take responsibility for the payment of CAT.

Late filing or payment

If you don’t file a tax return and pay the tax by October 31 there is a late filing charge. This is 5% if you delay 2 months or less and 10% after that.
Late payment interest charges of 0.0219% per day will also apply, (equivalent to 8% a year)

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Inheritance Tax on Property Abroad

You sometimes may have to pay inheritance tax (CAT) in Ireland and in another country on the same event.  Where countries have different taxation rules, the same gift or inheritance may become subject to tax in more than one country.

In Ireland, you can claim a credit against CAT if you have paid tax on foreign property. This is subject to conditions. Ireland has treaties with several countries, including the United Kingdom (UK) and the United States of America.

Irish Inheritance Tax on USA Property

An agreement between Ireland and the USA covers Inheritance Tax  . Ireland can only charge tax on property that is located abroad if the person giving the inheritance is either:

• domiciled in Ireland OR
• not resident in the USA.

If an Irish resident inherits property located outside Ireland from a USA resident, there will be NO liability for inheritance tax in Ireland. The USA will have charged federal estate tax on the property. Revenue do not need to be informed.

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Irish Inheritance Tax on UK Property

UK property is a bit more complicated – so you may well need to involve a solicitor or tax specialist.
There is a treaty between Ireland and the UK that covers CAT in Ireland and Inheritance Tax in the UK.

The main points of the treaty are as follows:

• Ireland will give credit for any inheritance tax paid on the UK property
• The credit given cannot be greater than the Irish tax due.
• The person who paid the double tax will receive the credit.
• If you received UK property, you can receive a credit if you paid UK tax on that property

Complications can arise because in the UK the estate is liable for the tax , whereas in Ireland the beneficiary is responsible for tax. The result is that different people may be liable for the taxes in the two countries.

Any UK tax paid will have to be converted to euros at the rate of exchange at the date of payment.
The estate value will also have to be converted at the valuation date (per Irish CAT legislation) at the applicable rate of exchange.

The credit is given to the person liable to the UK tax after all other costs have been paid . (That is normally the person who inherits an estate).
This person, who is called the residuary legatee , must also be liable to Irish CAT to claim the credit. If he/she pays no Irish CAT, the credit is lost.

More details here

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More information on Inheritance tax

National CAT Information Unit
City Centre/North City PAYE District
Central Revenue Information Office
Cathedral Street
Dublin 1
D01 DC77

Telephone opening hours: 10.00 to 12.30 Monday to Friday
Call  – 01 738 3673

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UK Inheritance Tax

In the UK the tax is charged on the estate, not on the recipients.
The rate of inheritance tax in the UK is 40% on anything above a £325,000 threshold.
(There is no tax if you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club.)
The threshold doubles to £650,000 for a married couple – as long as the first person to die leaves their entire estate to their partner.

There is an exception for the UK monarchy- Under a clause agreed in 1993 by the then UK prime minister, John Major, any inheritance passed “sovereign to sovereign” is exempt from tax.

In the UK , if someone owns a home – their UK tax-free threshold can increase to £500,000 if:

• the home is passed on to children (including adopted, foster or stepchildren) or grandchildren,
• the total estate is worth less than £2 million

(This can be doubled to £1 million for a married couple – as long as the first person to die leaves their entire estate to their partner)
(Figures valid Sept 2023 )

So an example : – someone in the UK passing on a property worth £830,000 to two children. (The deceased parent is the second parent to die and the first parent to die left their entire estate to their spouse)
The total inheritance tax threshold is  £1m – so there is no inheritance tax bill.

A similar situation in Ireland (see above)  on an €830,000 house – would result in an inheritance tax bill of €52,800 in total, or €26,400  per child.

In the UK – no tax is due on any gifts you give if you live for 7 years after giving them – unless the gift is part of a trust. This is known as the 7-year rule. No such rule applies in Ireland.

More here on UK Inheritance Tax