Inheritance taxes: what your family needs to know about recent changes

It may not have been much, but earlier this month, a number of changes were made to Ireland’s inheritance tax regime, which may ease the burden – somewhat – on families when they look to pass on the family home and other assets.

Indeed, an increase in the parent to child threshold means that a family with three children can now pass on an extra €60,000 tax free, or one with four children and 10 grandchildren could pass on an extra €120,000 tax free, thus saving the tax that would have otherwise arisen if the children had exceeded their thresholds.

So, what else might you need to know about changes to the inheritance, or capital acquisitions tax (CAT) regime?

Receipts on the rise

There is no doubt that the amount of CAT being collected by the Exchequer is on the rise, with the total yield surpassing €1 billion last year for the first time. This is more than double what was collected back in 2020. And inheritance tax is one of the main drivers of this, with some €968.4 million collected in 2025, up from €430.6 million in 2020, according to Revenue statistics.

More people are paying it, too. Figures show that 15,200 people paid the charge in 2025, up from 14,006 in 2024; 13,055 in 2023; and 11,376 in 2020. That’s a 25 per cent increase since 2020.

However, while there may be continued calls to increase the parent-to-child threshold further, the figures show that the biggest contributors to inheritance tax are those who leave money to relatives other than their children. The threshold for an aunt leaving money to a nephew or niece is quite low, at just €44,000. This means that a lot of the tax collected comes from this cohort – and it is on the rise.

As the table shows, so-called group B inheritances now account for 46 per cent of all receipts, compared with 41 per cent for parent-to-child transactions.

Did the changes go far enough?

The increase in the parent-to-child threshold of €20,000, or 5 per cent, will mean that someone inheriting €420,000 today, as opposed to before the budget, will save €6,600 in taxes. Group B, for transfers between relatives, also increased, from €40,000 to €44,000.

But is this enough?

Carl Donnelly is head of tax with accountancy and business advisory firm Cronin. He would have liked the Government to go further with the changes.

“It hasn’t really done enough in terms of where property prices are now,” he says, noting the continued increase in house prices. Today, for example, the median national price is €400,000 – or as much as €685,000 in Dún Laoghaire-Rathdown.

As Donnelly puts it, a child inheriting a three-bedroom house in Dublin, with a few thousand in savings, is going to “to end up a good bit over the threshold”, which will mean facing a tax bill.

He would like to see the parent-to-child exemption moved closer to €500,000 (this level was in fact last exceeded in 2009, when the threshold rose to €542,544), or for the introduction of some sort of exemption on the family home.

Biggest benefit

Those who stand to benefit the most from the latest changes are families who can avail of either CAT business relief or agricultural relief. This is because once certain conditions are met, these reliefs reduce the taxable value of the asset for gifts or inheritances by 90 per cent.

As Donnelly notes, if you have a parent passing on shares in a company or land that’s eligible for relief and is worth €4.2 million, its taxable relief will drop to €420,000 thanks to the relief.

“The €20,000 increase in the threshold actually allows for €200,000 worth of value to transfer tax free,” he says. “That’s kind of where the main benefit is. It can be quite useful”.

Home or savings

For typical families, however, the changes don’t amount to a lot.

“It’s better than nothing but it’s not a huge amount, and it’s not going to be life changing for families,” says Donnelly.

Alison McHugh, partner and head of private client tax services at EY, agrees that the increases were “relatively modest and are unlikely to fundamentally alter estate or succession planning strategies”.

However, she adds that they are nevertheless “a welcome development”, adding that they will at least help to mitigate the impact of asset price inflation, particularly in relation to family homes and business assets.

“For a family with four children and 10 grandchildren, this will allow an additional €120,000 of value to fall outside of the charge to Irish CAT,” she says.

There was increasing pressure before the budget to increase this by a substantial amount, given claims that the existing regime discriminated against single and childless people. However, the 10 per cent increase is unlikely to offer such relief.

“[The budget] hasn’t done anything for childless asset owners. A €4,000 increase is nothing in the grand scheme of things,” says Donnelly. Indeed, the increase means that someone would save €1,320 in tax thanks to the higher threshold.

As McHugh puts it, the change will help “somewhat”.

“For example, if you have no children but wish to split your estate between 10 nieces and nephews, this will allow you to give an additional €4,000 to each one, or €40,000 of value overall.”

One possible way to offer more relief is to allow a family home to be passed on tax free – no matter to whom it is transferred.

“It would alleviate a lot of concerns that childless homeowners have if the family home could pass tax free,” Donnelly says.

Consider a home worth €500,000 in Dublin. If this goes to a relative of the deceased, and they can use the group B threshold, then the inheritor will face tax at 33 per cent on €456,000 – or some €150,480.

“It can cause a bit of stress,” says Donnelly, noting that someone might inherit in August, and have to pay the bill by the middle of November − a short time frame in which to come up with such an amount, even if the intention is to sell the property.

Changing rates

An aspect of the recent budget that may have surprised was the decision to reduce capital gains tax to 31 per cent but to leave CAT at 33 per cent.

As Donnelly notes, if parents transfer a home to a child today, a CGT bill might arise on this transfer, while the child might face CAT, depending on their thresholds and the value of the property. This CGT can be used to offset the CAT charge but now they are being charged at different rates.

While “it’s probably rare that they’d equal each other,” Donnelly says, he adds that he’s surprised nonetheless that they don’t track each other.

“That’s something that might change next year,” he says, adding that, ideally, CAT would fall right back to 20 per cent, the rate it was at before the 2008 banking and property crash.

Small gifts

One area in which many would have liked to see change is the small gifts exemption. This has stayed at the €3,000 level for quite some time, and no change was made in the budget. It allows someone to receive a gift of €3,000, tax free, each year, from anyone. A couple could gift a child €6,000 each year between them (if they had it to give), or transfer up to €24,000 a year to a couple with two children.

“It would be great to see an increase in the small gift exemption as it has been €3,000 for a long time,” says McHugh. She adds that if this was increased to, say, €5,000, it could have a significant impact in allowing families to transfer wealth “in a more measured way but at a reduced tax cost”.

“It would also be helpful to families with no children as they could benefit a number of family members over a longer period of time at a significantly lower tax cost,” she says.

Donnelly agrees that the lack of a change was “very disappointing”.

“It’s a useful way for people to pass on bits of wealth,” he says.