Inheritance tax thresholds were raised across the board in Budget 2025, ensuring people will be able to inherit more before they are subject to capital acquisitions tax.
As widely flagged, the category A threshold, which applies for inheritances from parents to their children, was increased by €65,000 from its current level to €335,000 to €400,000 per child. It is the first increase in the threshold since 2019.
Minister for Finance Jack Chambers also raised the category B threshold for people receiving large gifts or inheritances from a grandparent, a great-grandparent, a sibling or an aunt or uncle to €40,000 from €32,500.
Category C, which covers all other inheritances and large gifts — those above €3,000 a year — will rise to €20,000 from €16,250.
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The changes will come into effect from tomorrow, October 2nd, under financial resolutions that the Dáil was voting on later on Tuesday.
The latter two thresholds had not been increased over the past six years.
There was no change in the rate at which tax is applied to amounts over those thresholds — 33 per cent.
All the thresholds are cumulative — applying to everything a person has received since December 5th, 1991, and into the future. There had been speculation that the start date might have been moved forward but that has not happened.
Alison McHugh, EY Ireland’s head of private client services said the changes would be welcomed, especially the category A threshold increase.
“Changes to the Group B and Group C thresholds go further than have been expected. However, as these bands have not increased in many years, this has been some time coming,” she said.
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Des Lynch, a partner, O’Flynn Exhams LLP, said the measures did not go far enough, “in particular, to combat the grossly unfair position many children find themselves in having to pay inheritance tax when inheriting from a parent”.
“Furthermore, there have been no amendments made to widen the availability of dwelling house relief, which still requires a child to have lived in the property they inherit for a period of three years before their parent passes away in order to inherit their parent’s house free from inheritance tax,” he said.
Campaigner Alan Shatter, a former Fine Gael minister, said the failure to abolish or structurally reform “outdated inheritance tax laws” was a big failure of Government, repeating his claim that the tax amounted to “State-sponsored grave robbery”.
“In a State that exempts substantial lottery and gambling wins from taxation, it seems that winning money on a flutter is perceived by Government as more beneficial to society and the State than the simple generosity of those deceased and their concern for the welfare and financial security of others,” said Mr Shatter, who is chairman of the Inheritance Tax Reform Campaign.
EY’s people advisory services partner Michael Rooney said inheritance taxes could be an “emotive issue ... especially for those people who stand to inherit a home, a farm or a business from parents”.
He said the welcome rise in the category A threshold would cost the exchequer about €56 million which, he said, was not very significant in the overall scale of the total budget package.
“In fact, reducing the [tax] rate from 33 per cent to 30 per cent as well as increasing the band would have only cost €78 million in total and would have been of even more benefit.”
