Understanding how much you can inherit tax-free is a crucial part of effective estate planning. In this article, we answer some of the key questions our solicitors are frequently asked about inheritance tax.
What tax must be paid on an inheritance?
Capital Acquisitions Tax (CAT) applies to gifts and inheritances received by individuals, depending on the value of the benefit and their relationship to the person providing it. It is charged at a standard rate of 33% on amounts exceeding tax-free thresholds, which vary according to the closeness of the relationship.
What are the tax-free thresholds?
The tax-free thresholds were updated in Budget 2025 and are effective for inheritances and gifts received on or after 2 October 2024.
| Group | Relationship to Disponer | Tax-Free Threshold |
|---|---|---|
| A | Child (including adopted, step, and certain foster children), minor child of a deceased child, or parent inheriting from a child (in specific circumstances) | €400,000 |
| B | Sibling, niece/nephew, grandparent, grandchild, or parent (if not qualifying under Group A) | €40,000 |
| C | All other relationships, including cousins, in-laws, and non-relatives | €20,000 |
Do spouses or civil partners have to pay inheritance tax?
Inheritances and gifts received from your spouse or civil partner are entirely exempt from CAT, regardless of the value of the assets involved.
This exemption applies to both married couples and registered civil partners. It also extends to certain transfers made under court orders following the dissolution of a marriage or civil partnership.
Therefore, if you inherit assets from your spouse or civil partner, you will not be liable to pay any CAT on those assets.
Are there any other exemptions?
Yes. Several additional exemptions may reduce or eliminate your CAT liability, depending on your circumstances:
- Dwelling house exemption – In some cases, inheriting a home you lived in with the deceased may be exempt from CAT.
- Small gift exemption – Gifts of up to €3,000 per year from any one person are exempt from CAT.
- Favourite niece or nephew – In rare circumstances, a niece or nephew may qualify for the higher Group A threshold if they meet strict conditions (such as working in the deceased’s business for a certain period).
What counts as a gift or inheritance?
CAT applies to a wide range of assets, including cash, property (such as land or houses), cars, jewellery, stocks and shares, and the free use of property and interest-free loans. Benefits received from discretionary trusts and increases in ownership of jointly held property on the death of another joint owner are also subject to CAT. Additionally, a gift may be treated as an inheritance if the person giving it dies within two years of the transfer.
How is tax calculated on non-monetary items?
Non-monetary items such as cars, jewellery, and paintings are taxed based on their market value at the valuation date – usually the date the beneficiary becomes entitled to the item. The market value is the price the item might reasonably be expected to fetch if sold on the open market.
This involves:
- Seeking a Valuation – An independent valuation may be required to determine the fair market value of valuable or unique items. This ensures Revenue accepts the declared value.
- Determining the Taxable Value – From the market value, you subtract any liabilities, costs, or expenses that are allowable (for example, outstanding loans attached to the asset) to arrive at the taxable value.
- Threshold Application – This taxable value is then compared against your relevant CAT threshold based on your relationship to the disponer (the person giving the item). Only the amount exceeding the threshold is subject to CAT at 33%.
Example: If you inherit a painting worth €50,000 and your CAT threshold is €40,000, you’ll pay 33% tax on the €10,000 excess, resulting in a €3,300 tax liability.
How and when is the tax collected?
CAT must be paid and filed by 31 October, with the specific year depending on the valuation date. If the valuation date falls between 1 January and 31 August, the deadline is 31 October of the same year. If it falls between 1 September and 31 December, the deadline is 31 October of the following year. Returns can be filed via Revenue Online Service or by submitting a paper Form IT38S.
Concerned about the tax you might pay on inheritance?
At McCarthy + Co Solicitors LLP, we specialise in estate planning and inheritance advice tailored to your circumstances. Whether you’re drafting a will, setting up a trust, or looking to minimise your CAT liability, our experienced team can guide you through the process with clarity and confidence. Arrange a time to consult with a solicitor today by completing our quick and confidential online form.
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