Who Should Read This?
Anyone who has recently inherited money or property in Ireland, is expecting to, or wants to plan ahead. Also essential reading for people considering how to pass on assets to children, siblings, or other beneficiaries — and for business owners and farmers thinking about succession.
In this guide, you’ll find:
- What Capital Acquisitions Tax (CAT) is and how it works
- The 2025 inheritance tax thresholds for Group A, B and C
- Who is exempt from CAT in Ireland
- All major reliefs including agricultural relief, business relief, and the dwelling house exemption
- How the small gift exemption works as a planning tool
- When and how to file a CAT return (Form IT38)
- Inheritance tax on foreign assets and non-residents
- Planning strategies to reduce your family’s CAT exposure
- Real examples with tax calculations
Key Takeaways
- Inheritance tax in Ireland is called Capital Acquisitions Tax (CAT) and is charged at 33%
- Tax-free thresholds are: €400,000 (Group A — children), €40,000 (Group B — siblings and relatives), €20,000 (Group C — all others)
- Spouses and civil partners are fully exempt — there is no CAT between them
- Thresholds are lifetime cumulative figures — all gifts and inheritances from the same group count together
- A CAT return must be filed when receipts exceed 80% of your threshold, even if no tax is due
- Agricultural and business reliefs can reduce taxable value by up to 90%
- The annual small gift exemption of €3,000 per person per year is one of the simplest planning tools available
- Early planning is far more effective than trying to manage CAT after an estate has transferred
What Is Inheritance Tax in Ireland?
When you inherit money, property, or assets in Ireland, you may be required to pay a tax on what you receive. This tax is officially called Capital Acquisitions Tax — usually shortened to CAT — and it applies to both gifts received during a person’s lifetime and inheritances received after someone dies.
The term “inheritance tax” is used widely in everyday conversation, but CAT is the correct legal term in Irish tax law. It is administered by Revenue and governed primarily by the Capital Acquisitions Tax Consolidation Act 2003.
The person who gives the gift or leaves the inheritance is called the disponer. The person who receives it is called the beneficiary. CAT is a liability of the beneficiary, not the estate — this is an important distinction from the United Kingdom, where inheritance tax is charged on the estate itself before distribution.
The current CAT rate in Ireland is 33%. This rate has been in place since December 2012 and applies to all taxable inheritances and gifts above the relevant threshold.
How CAT Works — The Basic Principle
CAT is not charged on the full value of an inheritance. It is charged only on the amount that exceeds your tax-free lifetime threshold. The threshold you receive depends entirely on your relationship to the disponer.
These thresholds are lifetime limits. Every gift and inheritance you receive from people in the same group is added together over your lifetime. Once the combined total exceeds your group threshold, CAT at 33% applies to everything above it.
This aggregation rule catches people who receive multiple inheritances or gifts over many years. If you received €200,000 from a parent ten years ago and now inherit a further €250,000 from the same parent’s estate, your total receipt is €450,000 — which is €50,000 above the Group A threshold. CAT of 33% applies to that €50,000, giving a liability of €16,500.
The 2025 Inheritance Tax Thresholds in Ireland
The thresholds were revised upward as part of Budget 2025, taking effect from 2 October 2024. These are the current figures:
Group A — €400,000
This threshold applies where the beneficiary is a child of the disponer. It includes biological children, adopted children, stepchildren, and in certain situations, foster children. It also applies where a parent inherits from a child and takes an absolute inheritance (full outright ownership) on the child’s death.
Group B — €40,000
This threshold applies to a broader set of relatives: brothers and sisters, nephews and nieces, grandchildren, great-grandchildren, and other lineal ancestors or descendants. The definition of nephew or niece for CAT purposes is specific — it means a child of a brother or sister of the disponer. An in-law’s nephew, for example, may not qualify.
Group C — €20,000
This threshold applies to everyone else — cousins, great-nephews, great-nieces, friends, unmarried partners, and any other beneficiary not covered by Groups A or B.
Spouses and Civil Partners — Fully Exempt
There is no CAT between spouses or civil partners. Inheritances and gifts between them are exempt regardless of value. This exemption is unlimited.
Understanding how CAT works in practice is easier with worked examples.
Example 1 — Child inheriting from a parent A mother leaves her son a house valued at €430,000. The Group A threshold is €400,000. The taxable amount is €30,000. CAT due is 33% of €30,000, which equals €9,900.
Example 2 — Two children sharing an estate A house worth €900,000 is inherited equally by two children. Each receives €450,000. Each has a Group A threshold of €400,000. Each has a taxable excess of €50,000. Each pays €16,500 in CAT — a total of €33,000 on the full estate.
Example 3 — Sibling inheriting A brother inherits €60,000 from his sister. His Group B threshold is €40,000. The taxable amount is €20,000. CAT due is €6,600.
Example 4 — Unrelated beneficiary A friend is left €50,000 in a will. Their Group C threshold is €20,000. The taxable amount is €30,000. CAT due is €9,900.
Example 5 — Lifetime aggregation A daughter received a gift of €250,000 from her father five years ago and now inherits a further €200,000 from his estate. Combined total received from Group A is €450,000. Threshold is €400,000. Taxable amount is €50,000. CAT due is €16,500 — even though neither individual receipt exceeded the threshold on its own.
What Assets Are Subject to CAT?
CAT applies to the following:
Immovable property (land and buildings) located in Ireland is always subject to CAT regardless of where the disponer or beneficiary is resident. Movable assets — cash, shares, vehicles, valuables — are subject to CAT if either the disponer or the beneficiary is resident or ordinarily resident in Ireland for tax purposes.
This means an Irish-resident beneficiary can have a CAT liability on an inheritance of foreign assets from a non-resident disponer. Conversely, a non-resident inheriting Irish property will still face an Irish CAT obligation. The rules around residency and CAT are nuanced and often intersect with double taxation treaties.
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What Is Exempt from CAT in Ireland?
Spouse and civil partner exemption — Fully exempt, as outlined above.
Small gift exemption — Every individual can receive up to €3,000 per year from any one person completely free of CAT. This exemption does not count toward your lifetime threshold. A couple could together give €6,000 per year to each child, entirely tax-free. Over ten years, that is €60,000 passed to a child without using any of their Group A threshold. Used strategically and consistently, this is one of the most effective tools in reducing a future CAT exposure.
Payments from pensions — Pension lump sums paid to a surviving spouse or dependant on death are generally exempt from CAT in Ireland. This is one reason why pension planning forms an important part of overall inheritance planning.
Certain payments on death — Payments under life assurance policies may be exempt depending on how the policy is structured. A policy taken out in trust specifically to pay a beneficiary’s CAT liability is a common planning technique.
Normal and reasonable living expenses — Maintenance payments and support for normal living expenses do not constitute a gift or inheritance for CAT purposes.
Key CAT Reliefs — How to Legally Reduce Your Inheritance Tax
Several substantial reliefs can reduce the taxable value of an inheritance dramatically. These are not loopholes — they are intentional features of Irish tax law designed to support family business and agricultural continuity, and to protect the principal private residence.
Agricultural Relief
Where a beneficiary qualifies as an active farmer and receives agricultural property — land, farm buildings, livestock, or farm machinery — the taxable value of that property can be reduced by 90%. This means only 10% of the property’s market value is used to calculate CAT.
The active farmer test requires the beneficiary to farm the land themselves, or lease it to a qualifying farmer, for a period following the inheritance. Beneficiaries who are not farmers but hold relevant agricultural qualifications may also qualify under specific conditions.
This relief is enormously significant in Ireland given the value of agricultural land. Without it, many family farm inheritances would generate CAT liabilities that could not be met without selling the farm itself.
Business Relief
Business relief mirrors agricultural relief for non-agricultural business assets. Where a beneficiary inherits qualifying business property — a sole trader business, a partnership interest, or shares in a private trading company — the taxable value can also be reduced by 90%.
Qualifying conditions include that the business must be a trading business (not an investment holding company), the disponer must have held the asset for a minimum period, and certain conditions on the beneficiary’s use of the assets apply post-inheritance.
Business relief is particularly relevant in family business succession planning and requires careful structuring to ensure the conditions are met.
Dwelling House Exemption
The dwelling house exemption provides a full CAT exemption on a residential property, subject to meeting all qualifying conditions. The key requirements are that the property must have been the principal private residence of the beneficiary for at least three years prior to the inheritance, the beneficiary must not own any other residential property at the date of the inheritance, and the beneficiary must continue to occupy the property as their principal residence for six years after the inheritance.
This exemption is frequently relevant for adult children who have been living with and caring for an elderly parent. It removes the CAT liability on the family home entirely in qualifying situations.
Favourite Nephew and Niece Relief
Where a nephew or niece has worked substantially full-time in a disponer’s business for at least five years before the inheritance, they may qualify to be treated as falling under Group A (the child threshold of €400,000) rather than Group B (€40,000). The practical impact of this is very significant — it lifts the tax-free amount tenfold for the qualifying beneficiary.
When You Must File a CAT Return
You are required to file a CAT return (Form IT38) with Revenue when the taxable value of what you receive exceeds 80% of your relevant group threshold. This filing obligation exists even if no CAT is actually payable.
For Group A, the filing threshold is €320,000 (80% of €400,000). For Group B, it is €32,000 (80% of €40,000). For Group C, it is €16,000 (80% of €20,000).
Filing is done through Revenue’s myAccount or ROS systems. CAT returns are due on 31 October following the valuation date, with payment due at the same time. The valuation date is generally the date on which the beneficiary becomes entitled to retain the asset.
Late filing attracts a 5% surcharge on the CAT liability where the return is up to two months late, rising to 10% where the delay is longer. Interest also accrues on late payments at a daily rate.
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What Is the Valuation Date?
The valuation date is the date on which the value of an inheritance is officially established for CAT purposes. This date is important because it determines when CAT becomes due.
For most inheritances of money or financial assets, the valuation date is typically close to the date of death. For property that must go through probate before it can be transferred, the valuation date is generally the date the executor has the authority to transfer the property to the beneficiary, or the date on which the property is actually retained by the beneficiary.
Because property values change over time, the difference between the valuation date and the filing deadline can sometimes affect the CAT liability — particularly for property that has appreciated or fallen in value since the date of death.
Inheritance Tax and Non-Residents — What You Need to Know
Non-residents inheriting Irish property will still face a CAT obligation in Ireland. The property’s location in Ireland is sufficient to trigger Irish CAT liability regardless of where the beneficiary lives.
Where the beneficiary is resident in a country that has a double taxation agreement with Ireland — including the United States and the United Kingdom — tax paid in that other jurisdiction on the same assets may be credited against the Irish CAT liability. This prevents double taxation but does not eliminate it.
Ireland’s CAT rules on residency are distinct from income tax residency rules. The ordinary residence test for CAT purposes has its own specific definition, and individuals who have recently left Ireland or recently arrived may need specialist advice to determine their position correctly.
Inheritance Tax Planning — Strategies That Work
The most important principle in inheritance tax planning is timing. CAT planning is most effective when started well in advance — ideally years before any transfer is expected to occur.
Annual small gift exemption — Using the €3,000 annual exemption consistently over a ten- or fifteen-year period can transfer a meaningful sum out of an estate without any CAT consequence.
Life assurance in trust — A Section 72 life assurance policy is specifically designed under Irish tax law to provide funds to pay a beneficiary’s CAT liability on death. The proceeds are used tax-free to discharge the inheritance tax, meaning the inherited asset itself does not need to be sold to fund the tax. This is a widely used strategy for estates involving illiquid assets like property or farmland.
Early transfer of business and agricultural assets — Transferring qualifying business or agricultural assets during a disponer’s lifetime rather than on death can sometimes produce a better outcome, depending on timing and whether conditions for relief are met at the time of transfer.
Pension wealth — Pension funds held at death generally fall outside the estate for CAT purposes (up to certain limits). Building pension wealth rather than other assets can therefore reduce the future CAT exposure of a beneficiary.
Deed of family arrangement — Where a will has already been executed and assets have transferred, it is sometimes possible to restructure the distribution among beneficiaries by deed within two years of the death. This can achieve a better overall tax outcome for the family where the original distribution was not optimal from a CAT perspective.
Inheritance Tax vs Probate — What’s the Difference?
These two concepts are related but separate. Probate is the legal process through which a will is validated and an executor is given the authority to administer a deceased person’s estate. Inheritance tax (CAT) is the tax that may arise when assets are transferred to beneficiaries.
In practice, the order of events depends on the type of asset. For bank accounts and shares, probate is typically required before the assets can be distributed, and CAT may be payable at the valuation date. For property, probate usually comes before the CAT return is due. It is possible in some situations to owe CAT before probate has fully concluded, which requires funding the tax in advance.
Frequently Asked Questions
What is the inheritance tax rate in Ireland?
The current rate of Capital Acquisitions Tax (CAT) is 33%, applied to the taxable value above the relevant group threshold.
How much can a child inherit tax-free in Ireland?
Under Group A, a child can receive up to €400,000 from a parent (or parents combined, as thresholds are per-recipient) before CAT applies. This is a lifetime cumulative threshold.
Do I pay inheritance tax if I inherit from a sibling in Ireland?
Yes, unless the total received from Group B relatives over your lifetime remains below €40,000. Above that figure, CAT at 33% applies.
Is there inheritance tax between spouses in Ireland?
No. Inheritances and gifts between spouses and registered civil partners are fully exempt from CAT in Ireland.
What happens if I don’t pay inheritance tax in Ireland?
Revenue charges interest on late payments and surcharges for late filing. Where property is involved, Revenue may place a charge on the property and can pursue collection through the courts.
