Child, relative or ‘stranger’? How inheritance tax works

The threshold depends on the relationship between benefactor and beneficiary

Once you reach 80 per cent of the threshold, you need to notify Revenue even though no tax is due until you exceed the threshold. Photograph: iStock

Once you reach 80 per cent of the threshold, you need to notify Revenue even though no tax is due until you exceed the threshold. Photograph: iStock

 

In Ireland inheritance tax is paid by the beneficiary, unlike in the UK or the United States.

There is a threshold below which no tax is payable, but this changes depending on the relationship between the beneficiary and the person giving the inheritance.

Category A: Children can receive up to €310,000 from a parent without paying capital acquisitions tax (inheritance tax).

Category B: Linear relatives – siblings, nephews/nieces and grandchildren – can receive up to €32,500 without paying tax.

Category C: Any other person, known as “strangers”, can receive only €16,250 before facing a tax bill. This group includes in-laws and cousins.

The thresholds are cumulative, so if you receive an inheritance form one parent and, later, from the other, you must add both together to see if you exceed the threshold. You only add inheritances within the same category. Any gifts received within a category (over €3,000 in a year from any one person) must also be added to the tot.

Once you reach 80 per cent of the threshold, you need to notify Revenue even though no tax is due until you exceed the threshold.

Anything above these thresholds is taxed at 33 per cent.

There is no tax on inheritances passing between spouses.

Historic rates
The amount a person can receive tax-free in inheritance started rising sharply in 1999 – from €244,932 for Category A, €32,658 for Category B, and €16,329 for Category C – to a high of €542,544, €54,254 and €27,127 in early 2009; before falling to a low of €225,000, €30,150 and €15,075 in 2012. It only started rising again in late 2015.

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