{"id":307586,"date":"2025-07-31T21:42:13","date_gmt":"2025-07-31T21:42:13","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/307586\/"},"modified":"2025-07-31T21:42:13","modified_gmt":"2025-07-31T21:42:13","slug":"inheritance-tax-reforms-unlikely-to-keep-everyone-happy-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/307586\/","title":{"rendered":"Inheritance tax reforms unlikely to keep everyone happy \u2013 The Irish Times"},"content":{"rendered":"

One of the contentious issues during the general election campaign was inheritance tax<\/a>. And both of the big Coalition parties made promises to cut the burden further in the years to come and to look at the \u201cfairness\u201d of the system. <\/p>\n

The recently published Tax Strategy Group papers<\/a> \u2013 drawn up by civil servants to outline options for budget day \u2013 have taken the debate further, scoping out possible reforms. Whatever happens here, there will be big debate. So what are the options?<\/p>\n

1. Do nothing: There is limited room for manoeuvre in the \u20ac1.5 billion budget tax package, promised in last week\u2019s Summer Economic Statement. So the Coalition parties could decide to do nothing. <\/p>\n

While commitments were made in the manifestos of the two big parties, the promises were not repeated in the Programme for Government. That said, both parties used rising house prices as a reason to increase the bands in the last budget. And those property prices have continued to rise. <\/p>\n

2. Increase the thresholds: In Ireland, as in most other countries, inheritance tax is paid by the person inheriting the money, rather than coming from the estate, as it does in the UK and US.<\/p>\n

The amount of inheritance tax you pay depends on your relationship to the person you are inheriting from \u2013 known in tax jargon as the disponer. <\/p>\n

For spouses and civil partners, inheritances are free of tax. There are then three tax free thresholds over which you pay the 33 per cent tax rate. The tax involved is formally known as capital acquisitions tax \u2013 which also covers gifts \u2013 and the thresholds are lifetime limits. So if you inherit from someone, large gifts (anything over \u20ac3,000 given in a single year) you received are also counted in.<\/p>\n

In last October\u2019s budget, the group A threshold which applies to children inheriting from a parent (or vice versa) rose to \u20ac400,000 from \u20ac335,000 previously. <\/p>\n

The group B threshold applies to brothers, sisters, nephews, nieces, and grandchildren of the person giving the gift or inheritance. It rose in the last budget from \u20ac32,500 to \u20ac40,000. The group C threshold, applying to everyone else, rose from \u20ac16,250 to \u20ac20,000. The total cost was \u20ac88 million to the exchequer in a full year.<\/p>\n

Special rules apply in some particular cases, such as foster children and inheritances by parents from their children, as well as in other limited cases.<\/p>\n

Further increases in the main thresholds would be the cleanest budget measure. The Fianna F\u00e1il manifesto promised to review the thresholds each year while Fine Gael said it would aim for thresholds of \u20ac500,000, \u20ac75,000 and \u20ac50,000 for the three categories \u2013 though it did not give a timescale for it. Might a rise in the Group A threshold to \u20ac450,000 be on the cards, with B rising to \u20ac45,000?<\/p>\n

3. Focus on the Group B threshold. In a recent answer in the D\u00e1il, Minister for Finance Paschal Donohoe said the Government would ask that the specific issue of the relatively low level of the B threshold relative to the A one would be examined by the Tax Strategy Group (TSG). <\/p>\n

This is seen by some to unfairly disadvantage some family relations \u2013 for example those inheriting from aunts and uncles can inherit \u20ac40,000 tax free, compared to those inheriting from parents, where the figure is \u20ac400,000. People who do not have children feel particularly strongly on the issue.<\/p>\n

The TSG points out that 70 per cent of those who received a substantial inheritance received it from their parents \u2013 and that the Irish legal system differentiates in other areas between direct familial relationships and more distant ones. <\/p>\n

Because of the level of tax relief which applies to children inheriting from their parents, the amount of inheritance tax raised under the Group B threshold \u2013 \u20ac339 million last year \u2013 was actually higher than the than Group A total, at \u20ac298 million. (When gifts are added in, the total revenue from Group A remains slightly higher.) <\/p>\n

This means reform of the Group B threshold would not come cheaply. While the officials warned that it was impossible to give a precise estimate, they said that giving those in Group B the same \u20ac400,000 threshold as children in Group A would cost a maximum of \u20ac300 million a year. Of course a smaller increase in the Group B threshold would also be an option.<\/p>\n

4. Introduce new reliefs: Another option to help heirs beyond direct children would be to allow the person making the gift or inheritance select one or two people who could benefit from the Group A threshold. <\/p>\n

This would also be potentially costly to the exchequer and thought would be needed in framing any new rules \u2013 to ensure, for instance, that children were not disadvantaged.<\/p>\n

5. Reforms with no cost to the exchequer: Government officials tend to put forward options which are unlikely to happen, as well as likely runners. The TSG report points out that if the Government wanted to merge the A and B threshold without any cost to the exchequer, it could create a single threshold at \u20ac151,500. <\/p>\n

This might please nieces and nephews receiving inheritances, but would leave children much worse off, as a lot more of what they get would be exposed to the 33 per cent charge. <\/p>\n

It would, however, be in line with the report of the Commission on Tax and Welfare<\/a>, which reported in 2022 and called for a significant cut in the Group A threshold.<\/p>\n

6. Raising money: Perhaps to annoy their political masters, the civil servants also scoped out ways of raising more money. One was, as in countries such as France, to charge a higher rate on larger inheritances \u2013 and a much smaller one on smaller amounts. Removing the tax thresholds entirely and having a sliding scale of rates from 1 per cent on amounts below \u20ac40,000, rising gradually to 40 per cent on amounts over \u20ac400,000 would raise close to \u20ac1 billion extra for the exchequer. <\/p>\n

Another was \u2013 again as recommended by the Commission on Tax and Welfare- to reduce the relief available to people inheriting farms or businesses which allows for a 90 per cent reduction in liabilities and also tax-free thresholds. This also looks unlikely seeing as the Programme for Government<\/a> promises to take new measures to boost farm succession and \u201csupport farm transfers by reviewing the tax-free threshold for Capital Acquisitions Tax\u201d.<\/p>\n

Any reforms in Budget 2026 are likely to give, rather than take. <\/p>\n","protected":false},"excerpt":{"rendered":"One of the contentious issues during the general election campaign was inheritance tax. And both of the big…\n","protected":false},"author":2,"featured_media":307587,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3093],"tags":[51,474,3303,3121,2499,112785,16,15],"class_list":{"0":"post-307586","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-inheritance","11":"tag-inheritance-tax","12":"tag-personal-finance","13":"tag-smart-money","14":"tag-uk","15":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114950029118014294","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/307586","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=307586"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/307586\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/307587"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=307586"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=307586"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=307586"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}