How is inheritance tax calculated in Ireland? Inheritance tax in Ireland is called Capital Acquisitions Tax (CAT). It is charged at a flat rate of 33% on the value of a gift or inheritance that exceeds the recipient’s lifetime tax-free threshold. The threshold depends on the relationship to the person who died: Group A (parent to child) is EUR 400,000; Group B (grandparent, sibling, niece/nephew) is EUR 40,000; Group C (all other relationships) is EUR 20,000. These thresholds are cumulative over your lifetime. CAT is paid by the recipient, not the estate. A CAT return must be filed and tax paid within four months of the valuation date.
Joe Coyle Financial Consultants, a CBI-regulated financial broker in Donegal and part of the Money Maximising Advisors group, provides specialist inheritance tax advice Ireland, helping families across Ireland plan their estates to minimise CAT exposure and pass wealth to the next generation as tax-efficiently as possible. Further guidance at Money Sense Financial Services.
Most Irish families discover the full impact of inheritance tax only when they receive an inheritance, and by then, the planning window has largely closed. The good news is that with the right structure, many Irish families can significantly reduce or eliminate their CAT liability. This guide explains exactly how the system works, how to calculate what you owe, and the strategies that can legally reduce the bill.
How Inheritance Tax (CAT) Works in Ireland
Capital Acquisitions Tax (CAT) is paid by the person who receives a gift or inheritance, not the person who gives it or the estate. It applies when the total value of gifts and inheritances received from people in the same relationship group exceeds the lifetime threshold.
Key point 1: CAT is cumulative over your entire lifetime, every gift and inheritance from the same group counts toward the threshold
Key point 2: The tax-free threshold resets by relationship group, a separate EUR 400,000 applies from each parent independently
Key point 3: Gifts received in the two years before death are treated as inheritances for CAT purposes, this affects planning timing
Key point 4: Between spouses and civil partners, all gifts and inheritances are fully exempt from CAT with no threshold limit
CAT Thresholds in Ireland 2026: The Three Groups
| Group | Relationship | Lifetime Tax-Free Threshold | CAT Rate Above Threshold |
| Group A | Parent to child (or child to parent) | EUR 400,000 | 33% |
| Group B | Grandparent, sibling, niece/nephew, grandchild | EUR 40,000 | 33% |
| Group C | All other relationships (friends, unmarried partners) | EUR 20,000 | 33% |
💡 The Group A threshold of EUR 400,000 applies separately from each parent. A child can receive EUR 400,000 from their mother and EUR 400,000 from their father before CAT applies, EUR 800,000 from both parents combined over their lifetime. This is widely misunderstood. Many families assume the EUR 400,000 is shared between both parents; it is not.
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Step-by-Step: How to Calculate Your Inheritance Tax in Ireland
Step 1: Identify Your Relationship Group
Your relationship to the person who left the inheritance determines your Group, A, B, or C, and therefore your lifetime threshold.
Step 2: Add Up All Prior Gifts and Inheritances From the Same Group
Your threshold is cumulative. If you previously received EUR 150,000 from a parent as a gift 10 years ago, that used EUR 150,000 of your Group A threshold. Only EUR 250,000 remains.
Step 3: Subtract the Annual Small Gift Exemption
The first EUR 3,000 per year from any individual giver is exempt from CAT and does not count toward your threshold. Gifts within this limit are excluded from the calculation entirely.
Step 4: Apply the Threshold
Once prior gifts are accounted for, subtract your remaining threshold from the taxable value of the inheritance. If the inheritance is below the remaining threshold, no CAT is due.
Step 5: Calculate 33% on the Excess
CAT is charged at 33% on the amount above the threshold.
Worked Example: Family Home Inheritance
Situation: Parent dies leaving a family home worth EUR 550,000 to one child
Prior gifts from parent: EUR 50,000 received during parent’s lifetime
Total received: EUR 600,000
Group A threshold: EUR 400,000
Taxable amount: EUR 600,000 minus EUR 400,000 = EUR 200,000
CAT at 33%: EUR 200,000 x 33% = EUR 66,000 due
The child owes EUR 66,000 in CAT within four months of the valuation date. Without a Section 72 policy to cover this bill, the child may need to either sell the property or raise funds urgently.
What Is Exempt From Inheritance Tax in Ireland?
1. Spouse and Civil Partner Exemption
All gifts and inheritances between spouses and civil partners are completely exempt from CAT, there is no threshold limit. This is one of the most valuable exemptions in the Irish tax code and is one reason that inter-spouse estate planning is a key first step for married couples.
2. The Annual Small Gift Exemption, EUR 3,000
Any person can receive up to EUR 3,000 per year from each individual giver, completely free of CAT, with no impact on their lifetime threshold. Two parents can each give EUR 3,000 per year to each child, EUR 6,000 per child per year tax-free and threshold-preserving. Over 20 years, this transfers EUR 120,000 per child with zero CAT.
3. The Dwelling House Exemption
A child who has lived in the family home for the three years before the parent’s death, and who has no other property, can inherit the family home completely free of CAT, regardless of its value. This is one of the most powerful exemptions available to Irish families but it comes with strict conditions that must be met precisely. Joe Coyle Financial Consultants advises clients on structuring their affairs to meet the dwelling house exemption conditions.
4. Agricultural Relief
Qualifying agricultural property can receive a 90% reduction in taxable value for CAT purposes, dramatically reducing the effective tax exposure on farm transfers within families.
5. Business Relief
Trading businesses and qualifying shareholdings receive a similar 90% reduction in taxable value, making the transfer of a family business significantly more tax-efficient than the transfer of equivalent assets in cash or property.
⚠️ Important: Agricultural Relief and Business Relief have strict qualifying conditions. The recipient must meet specific criteria, qualification as a farmer, or active involvement in the business, and the conditions must be met at the time of the inheritance. Failure to meet the conditions results in a claw-back of the relief. Joe Coyle Financial Consultants reviews relief eligibility as part of every estate planning consultation.
What Is Section 72 Life Insurance and How Does It Help?
Section 72 is a specific type of life insurance policy designed to pay a CAT liability on death without the payout itself being subject to CAT. It is structured through a discretionary trust, with the proceeds used to pay the beneficiaries’ inheritance tax bill.
Who pays the premium: The person whose estate will create a future CAT liability, typically a parent
Who benefits: The children or other beneficiaries who will receive the estate and face the CAT bill
Tax treatment of payout: The Section 72 policy payout is not subject to CAT when used to pay a CAT liability, making it the only way to pay a tax bill with tax-free money
When it is most valuable: Where the estate includes an asset that cannot be easily sold to pay a tax bill, a family home, a farm, or a business
💡 A Section 72 policy can be surprisingly affordable. For a 55-year-old non-smoker with a EUR 66,000 CAT liability on their estate, the annual premium for a whole-of-life Section 72 policy can be under EUR 2,000 per year. Joe Coyle Financial Consultants assesses the optimal Section 72 structure and source provider for every client’s estate.
► Book a Free Inheritance Tax Consultation, Joe Coyle Financial Consultants, Donegal
Is It Better to Gift Before Death or Leave Through Inheritance?
In most cases, gifting during life is more tax-efficient than leaving assets through inheritance for three reasons. First, you can use the annual EUR 3,000 small gift exemption each year on lifetime gifts but not on bequests. Second, assets gifted during life that grow in value after the gift accrue to the recipient’s estate, not yours. Third, consistent gifting over decades can significantly erode the future taxable estate without touching the lifetime threshold.
The exception is the two-year rule: gifts made within two years before death are aggregated with inheritances and reduce the threshold available on the inheritance. For this reason, any significant lifetime gifting strategy should ideally be in place well before the final years of life.
Frequently Asked Questions: Inheritance Tax Ireland
How is inheritance tax calculated in Ireland?
Inheritance tax in Ireland (CAT) is calculated by adding all gifts and inheritances received from the same relationship group over your lifetime, subtracting the annual small gift exemption (EUR 3,000 per year per giver), subtracting the remaining Group A/B/C threshold, and applying 33% CAT to the excess. Joe Coyle Financial Consultants provides a free inheritance tax calculation for every client.
What are the inheritance tax rates in Ireland in 2026?
CAT is charged at a flat rate of 33% on the value of gifts and inheritances above the lifetime threshold. The thresholds are: Group A (parent to child) EUR 400,000; Group B (grandparent, sibling, niece/nephew) EUR 40,000; Group C (all other relationships) EUR 20,000.
How much can I inherit tax-free from my parents in Ireland?
Up to EUR 400,000 from each parent over your lifetime, so up to EUR 800,000 from both parents combined. This is in addition to the EUR 3,000 per year small gift exemption that does not count against the threshold.
Do I pay inheritance tax on the family home in Ireland?
Possibly not, if you qualify for the Dwelling House Exemption. This exemption applies where you lived in the family home for the three years before the parent’s death and you own no other property. If eligible, you can inherit the family home with no CAT regardless of its value.
When do I have to pay inheritance tax after receiving an inheritance?
A CAT return must be filed and tax paid within four months of the valuation date of the inheritance. The valuation date is typically the date of death, but can be later in some circumstances. Failure to pay on time attracts interest at approximately 8% per year. Joe Coyle Financial Consultants advises on timing and options if funds are not immediately available.
► Get a Free Inheritance Tax Review, Joe Coyle Financial Consultants, Donegal
Important Information
This article is for general information only and does not constitute financial advice. CAT threshold, inheritance tax rate and Section 72 information is correct at the date of publication. Joe Coyle Financial Consultants Ltd is regulated by the Central Bank of Ireland (C54725), part of Money Maximising Advisors (C154250). Always seek personalised advice from a Qualified Financial Advisor before making financial decisions.
Joe Coyle Financial Consultants Ltd | jcfc.ie | info@jcfc.ie | +353 091 342596
Part of Money Maximising Advisors Group | mmadvisors.ie | moneysense.ie
