Written answers
Thursday, 24 October 2024
Department of Finance
Tax Code
Michael Healy-Rae (Kerry, Independent)
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140. To ask the Minister for Finance if a revision of tax-free allowances with regard to inheritance will be examined (details supplied); and if he will make a statement on the matter. [43797/24]
Jack Chambers (Dublin West, Fianna Fail)
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In relation to the Deputy's request for a revision of the Capital Acquisitions Tax (CAT) tax-free thresholds and the example provided in regards to a couple who do not have children but wish to leave property to their niece or nephew, the following reliefs/exemptions are available for the purposes of CAT.
Capital Acquisitions Tax (CAT) is a tax which applies to both gifts and inheritances. For CAT purposes, the relationship between the person giving a gift or inheritance (i.e. the disponer) and the person who receives it (i.e. the beneficiary) determines the maximum amount, known as the “Group threshold”, below which CAT does not arise.
The following changes to the CAT tax-free thresholds which took effect from midnight on 2 October 2024;
- The Group A threshold increased from €335,000 to €400,000 and applies where the beneficiary is a child, including adopted children, stepchildren and certain foster children, of the disponer.
- The Group B threshold increased from €32,500 to €40,000 and applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant such as a grandchild of the disponer.
- The Group C threshold increased from €16,250 to €20,000 and applies in all other cases.
For clarity it is useful to note that the definition for children for CAT purposes includes any stepchildren, adopted children or certain foster children. All can avail of the Group A threshold in respect of gifts and inheritances received from that disponer.
In addition, nieces or nephews of that disponer may qualify for favourite niece or favourite nephew relief in respect of gifts or inheritances of business assets. The relief allows a niece or nephew who qualifies for the relief to avail of the Group A threshold. Qualifying nieces or nephews are those who have worked substantially on a full-time basis for a period of five years prior to the gift or inheritance being given in carrying on, or assisting in the carrying on, the trade, business or profession, of the disponer.
For the nephew or niece to be deemed to be working substantially on a full-time basis in the business he or she must work:
- more than 24 hours per week at the place where the business, trade or profession is carried on; or
- more than 15 hours per week at the place where the business, trade or profession is carried on exclusively by the disponer, any spouse or civil partner of the disponer and the nephew or niece.
- have lived there for a specified period of time before the inheritance,
- will continue to live there for a specified period of time after the inheritance, and
- who have no beneficial interest in any other residential property at the date of the inheritance.
The options available for setting CAT thresholds must be balanced against competing demands. The increases announced as part of Budget 2025 represent meaningful increases across all thresholds and are part of a broader package to support taxpayers across the country.
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