People will be able to receive greater amounts in gifts or inheritance without paying tax under changes announced in the budget.
However, the Government has stopped short of wider reforms called for by a number of interest groups and analysts.
Minister for Finance Simon Harris confirmed that each of the three capital acquisitions tax (CAT) categories will be increased.
Category A, which mostly relates to children inheriting from their parents will increase by to €420,000 from €400,000 currently.
The tax exemption under Category B, covering inheritances from a close blood relative – a grandparent, great-grandparent, sibling, aunt or uncle – will jump to €44,000 from €40,000.
All other inheritances and gifts are covered by Category C which moves from €20,000 currently to €22,000.
Those thresholds apply equally to gifts received in excess of the €3,000 annual small gift exemption.
Mary Moran, tax director at Baker Tilly Ireland, described the increases in thresholds as “modest”, adding “but the reality is that continued inflation will erode a substantial portion of the benefits from the changes”.
The Government collected €1.1 billion in CAT in 2025, with tax on gifts accounting for just 15 per cent of that, according to a report on inheritance tax in Ireland published last week by the Parliamentary Budget Office.
While the tax accounted for just 1 per cent of exchequer receipts, the amount it has raised has risen sharply, especially in recent year, with increases in excess of 30 per cent in each of the past two years. The €1.1 billion collected last year compares to €391 million back 2007 just ahead of the financial crash.
Category B beneficiaries account for the largest share of that sum, €449 million, followed by those in category A (€398.9 million). Dublin residents account for just over half of all CAT collected.
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The Government has come under pressure from a growing lobby who argue that people with no children are discriminated against under current rules because their beneficiaries can benefit by no more than €40,000 before tax kicks in, just one-tenth of the figure for children inheriting from their parents.
However, ahead of the budget, Minister for Public Expenditure Jack Chambers had ruled out any significant move in this direction. Speaking at the Dublin Economics Workshop, he said: “The cost of equalising inheritance tax between category A and B is hundreds of millions of euro, far outside of what’s available in our tax package.
“The tax expenditure cost of every €5,000-€10,000 [change to the thresholds] is very significant, so we have to be honest about what’s available when we’re prioritising income tax [in the budget],” he said.
The Government has focused over many years on trying to ensure that children should not be forced to sell a home inherited from a parent to meet a tax bill. However, that target has come under pressure in recent years, especially in Dublin, given the rise in the price of even average homes.
There have also been calls to lower the 33 per cent rate at which inheritance tax is charged on sums above the exemption thresholds.
Dave O’Brien, the head of tax at business advisory group Xeinadin Ireland, said ahead of the budget that lowering the rate the tax is charged at to 20 per cent – where it was for several years up to the financial crash – would encourage greater transfer of wealth between generations.
Another measure the Government should consider, he said, was the seven-year gifting rule that exists in the UK, under which any lifetime transfers are free of tax as long as the donor survives for seven years.
