In the 2025 Budget unveiled by the Finance Minister Jack Chambers, there was a widespread increase in inheritance tax thresholds, allowing more wealth to be passed down before capital acquisitions tax is incurred. This included a rise from €335,000 to €400,000 per child in the category A threshold, concerning inheritance received from parents. The adjustment, which is €65,000 higher than the previous level, marks the first enhancement of the limit since 2019.
Another change affected the category B threshold, applicable to substantial bequests or gifts from grandparents, great-grandparents, siblings, aunts, or uncles. This figure rose from €32,500 to €40,000.
On the other hand, the threshold for category C, which covers all other major gifts and inheritances exceeding €3,000 per annum, will be raised to €20,000, up from €16,250.
These amendments will become effective starting October 2nd, in line with the financial resolutions that the Dáil was set to vote on later on Tuesday. The previous six years had seen no enhancements to the latter two thresholds.
Notably, the tax rate for amounts exceeding these thresholds remains unchanged at 33 per cent. All thresholds are accumulative, counting all gifts or inheritances received from December 5th, 1991, onward. However, contrary to expectations, no adjustments to this date were announced.
The increases were applauded by Alison McHugh, EY Ireland’s head of private client services, particularly the category A threshold. She expressed that changes to Group B and Group C thresholds were more significant than anticipated, manifesting that previously stagnant bands were due for a raise.
Des Lynch, a partner at O’Flynn Exhams LLP, argued that the actions taken by the government are insufficient, especially in addressing the unjust situation where children are obligated to pay inheritance tax upon the demise of their parents. Lynch also pointed out the unaltered conditions for availing dwelling house relief, which still necessitates a child to have resided in the inherited property for at least three years before their parent’s death for exemption from inheritance tax.
Alan Shatter, a former Fine Gael minister and leading protestor, criticised the government’s inability to eliminate or remodel the “outmoded inheritance tax laws”, even going as far as to label the tax as “State-sponsored grave robbery”. According to Shatter, who heads the Inheritance Tax Reform Campaign, in a state where considerable lottery and gambling profits are exempt from taxes, the government seems to value lottery windfalls over the sincere generosity of the deceased, who worry about the financial wellbeing of their beneficiaries.
Michael Rooney, EY’s partner of people advisory services, highlighted that inheritance taxes can be a sensitive subject, particularly for those who are set to inherit residential properties, farmlands, or businesses from their parents. Rooney identified that the small increase in the category A threshold could burden the treasury with an estimated €56 million, a seemingly insignificant figure in the greater scheme of total budget package. He suggested that the tax rate could be cut down from 33% to 30% and the tax bracket could be elevated, a move that would total only €78 million but provide much more benefit.