Capital Acquisitions Tax — CAT — is one of the most financially significant taxes Irish families face, yet one of the least planned for. With property values having risen dramatically over the past two decades, a growing number of Irish inheritances now exceed the tax-free thresholds, creating unexpected tax bills at exactly the moment families are least prepared to deal with them.
At Money Sense Financial Services in Killarney, our inheritance tax advice service helps families across Kerry and Ireland understand their CAT exposure, structure gifts and inheritances efficiently, and put plans in place to protect as much family wealth as possible. This guide covers the updated thresholds, all key exemptions, and the most effective planning strategies available to Irish families today.
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What Is Capital Acquisitions Tax in Ireland?
Capital Acquisitions Tax (CAT) is the Irish tax applied to gifts and inheritances. It is charged at a flat rate of 33% on the taxable value of any gift or inheritance above your applicable tax-free group threshold. CAT applies whether you receive property, cash, shares, or any other asset with value.
The person who gives the gift or inheritance is called the “disponer”. The person who receives it is called the “beneficiary”. The group threshold that applies depends on the relationship between beneficiary and disponer — not on the value of the total estate.
One of the most important features of CAT is that the thresholds are lifetime cumulative totals. Every gift and inheritance you have received in a given group since 5 December 1991 counts against your threshold. If you received a gift from your parents 20 years ago, it reduces the tax-free amount available to you today.
CAT Group Thresholds — Current Rates
Budget 2025 brought significant and long-overdue increases to the CAT thresholds, effective from 2 October 2024. Here are the current group thresholds:
| Group | Relationship | Threshold | Rate |
| Group A | Child from parent | €400,000 | 33% on excess |
| Group B | Sibling, niece, nephew, grandchild | €40,000 | 33% on excess |
| Group C | All others (friends, distant relatives) | €20,000 | 33% on excess |
These thresholds represent the total amount you can receive, across all gifts and inheritances in the relevant group, without paying tax. Any amount above the threshold is taxed at 33%.
Note: The small gift exemption allows any individual to receive up to €3,000 per year from any single person without this counting towards their CAT threshold. This exemption sits entirely outside the group thresholds — it does not erode them.
How the Group Thresholds Work in Practice
Group A: Parent to Child
The Group A threshold of €400,000 applies to gifts and inheritances from a parent to a child, including adopted children, stepchildren, and in certain circumstances foster children. It is a combined lifetime threshold covering gifts from both parents — meaning both parents share one €400,000 threshold per child, not €400,000 each.
Example: A child receives a gift of €150,000 from their mother at age 30, then inherits €350,000 from their father at age 55. Their total receipts in Group A are €500,000. The first €400,000 is tax-free. The remaining €100,000 is taxed at 33% = a CAT bill of €33,000.
Group B: Relatives
Group B applies to gifts and inheritances from siblings, grandparents, grandchildren, parents in certain circumstances, and nieces and nephews under the “favourite nephew/niece” relief (where the niece or nephew worked substantially full-time in the disponer’s business). The threshold is €40,000 — significantly lower than Group A.
This low threshold means that a sibling leaving a house worth €300,000 to another sibling will generate a CAT liability on €260,000 at 33% — approximately €85,800. This surprises many families who assumed the family home could pass between siblings without tax.
Group C: All Others
Group C — which covers friends, more distant relatives, and any relationship not classified as A or B — has a threshold of just €20,000. This is rarely sufficient to shelter any meaningful gift or inheritance, and applies to an increasingly common situation: someone leaving a property to a close friend or unmarried partner (who is not a civil partner).
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Key CAT Exemptions That Can Significantly Reduce Your Liability
Spouse and Civil Partner Exemption
Any gift or inheritance between spouses or civil partners is fully exempt from CAT, regardless of value. This is an absolute exemption with no ceiling. However, it does not extend to unmarried partners or cohabitants, which creates significant estate planning considerations for couples who have not married or entered a civil partnership.
Dwelling House Exemption
A family home can pass to a child (or qualifying beneficiary) free of CAT where specific conditions are met. The beneficiary must have lived in the property as their principal private residence for the three years immediately before the inheritance, must not own any other residential property at the date of inheritance, and must continue to live in the property for six years following the inheritance.
This exemption is one of the most valuable in Irish tax law but is frequently misapplied. A child who already owns their own home does not qualify. A child who has not lived continuously in the family home for the qualifying three-year period does not qualify. Planning in advance — ensuring a child lives in the family home for the required period where that is the intended strategy — is essential.
Agricultural Relief
Agricultural relief reduces the taxable value of qualifying agricultural property by 90%, dramatically reducing — or eliminating — the CAT due. To qualify, the beneficiary must be a “farmer” for CAT purposes, meaning at least 80% of their assets (after the inheritance) consist of agricultural property. The property must also be farmed by the beneficiary or leased on a long-term basis.
Business Relief
Similarly, business assets including shares in qualifying trading companies can attract 90% business relief on their value for CAT purposes. This makes it possible to pass a family business to the next generation with a fraction of the tax liability that would otherwise apply. The qualifying rules are complex and require careful planning well in advance of any transfer.
The Annual Small Gift Exemption
Each individual can receive up to €3,000 from any single person in a calendar year without it counting towards their CAT threshold. A couple can therefore give each of their children €6,000 per year — entirely outside the CAT system. Over ten years, that is €60,000 per child transferred tax-free. Over twenty years, €120,000. The cumulative effect of consistent annual gifting is significant and widely underused.
Does the CAT Threshold Increase in Ireland Apply to Your Situation?
The Budget 2025 increases — Group A from €335,000 to €400,000, Group B from €32,500 to €40,000, and Group C from €16,250 to €20,000 — came into effect on 2 October 2024. Gifts or inheritances received on or after that date benefit from the new thresholds.
However, cumulative thresholds mean that gifts received before October 2024 count against your current threshold using the threshold applicable at the time of that gift. Revenue’s CAT aggregation rules are complex, and any individual with significant prior receipts should seek professional advice to understand their current remaining threshold accurately.
Practical Strategies for Reducing Your Family’s CAT Exposure
- Use the small gift exemption systematically: €3,000 per child per parent per year, every year
- Review ownership structures: assets jointly owned between spouses attract the spouse exemption on the surviving partner’s death
- Plan the family home carefully: the Dwelling House Exemption requires advance planning to ensure qualifying conditions are met
- Consider Section 72 life insurance: a policy written under Section 72 trust pays out tax-free specifically to cover a CAT liability on death — premiums are paid during your lifetime and the proceeds are exempt from CAT
- Time significant gifts before or after potential threshold changes: if further threshold increases are anticipated, deferring a gift may be beneficial
- Review wills regularly: a poorly structured will can expose beneficiaries to unnecessary CAT — a review with both a solicitor and a financial advisor is recommended
Our inheritance tax advice service works alongside solicitors to ensure our clients’ estate plans are both legally sound and tax-efficient. We also work closely with clients on protection advice including Section 72 policies to cover anticipated CAT liabilities.
How Does Capital Acquisitions Tax Work for Non-Irish Assets?
CAT can apply to non-Irish assets if either the disponer or the beneficiary is resident or ordinarily resident in Ireland for tax purposes. Ireland has double taxation agreements with some countries, but the rules are complex and fact-specific. If you have assets abroad or are planning to receive an inheritance from outside Ireland, specialist advice is strongly recommended.
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Frequently Asked Questions
1. What are the CAT thresholds in Ireland?
The current CAT group thresholds are: Group A (parent to child) €400,000; Group B (siblings, grandchildren, nieces/nephews) €40,000; Group C (all others) €20,000. These are cumulative lifetime thresholds, increased from 2 October 2024 under Budget 2025. Any amount above the relevant threshold is taxed at 33%.
2. Has the CAT threshold increased in Ireland recently?
Yes. Budget 2025 increased all three CAT group thresholds with effect from 2 October 2024. The Group A threshold rose from €335,000 to €400,000, Group B from €32,500 to €40,000, and Group C from €16,250 to €20,000. These are the most significant increases to CAT thresholds in a number of years.
3. How much can a child inherit tax-free in Ireland?
A child can inherit or receive gifts of up to €400,000 from a parent (combined, from both parents) over their lifetime without paying Capital Acquisitions Tax. This is the Group A threshold as of October 2024. Any amount above this is taxed at 33%. Annual gifts of up to €3,000 per year per parent do not count towards this threshold.
4. What is the inheritance tax rate in Ireland?
Capital Acquisitions Tax — inheritance tax in Ireland — is charged at a flat rate of 33% on the taxable amount above the relevant group threshold. There is no inheritance tax between spouses or civil partners.
5. What gifts are exempt from CAT in Ireland?
Key CAT exemptions include: gifts between spouses and civil partners (fully exempt); the annual small gift exemption of €3,000 per person per year from any single giver; the Dwelling House Exemption (family home to qualifying child); Agricultural Relief (90% reduction on qualifying farm assets); and Business Relief (90% reduction on qualifying business assets).
6. How does Capital Acquisitions Tax work in Ireland?
CAT is charged on the value of gifts and inheritances received above your lifetime tax-free group threshold. The threshold depends on your relationship to the person giving the gift or inheritance. All gifts and inheritances in the same group since 5 December 1991 count cumulatively against your threshold. Any taxable amount above the threshold is charged at 33%.
7. What assets are subject to inheritance tax in Ireland?
All assets with monetary value are potentially subject to CAT, including property, cash, investments, business interests, and personal possessions. Irish property is within scope regardless of where the parties are based. Non-Irish property is in scope if either the disponer or beneficiary is resident or ordinarily resident in Ireland.
Protect Your Family’s Wealth From Unexpected Tax Bills
Capital Acquisitions Tax catches thousands of Irish families off guard every year — particularly as property values have risen far faster than the tax-free thresholds historically kept pace with. With the right advice and early planning, a significant proportion of your family’s CAT exposure can be reduced or eliminated entirely.
Money Sense Financial Services provides inheritance tax advice and estate planning guidance to families across Kerry and Ireland. Our advisors combine deep expertise in CAT legislation with practical financial planning tools — including Section 72 life insurance — to give our clients the most comprehensive protection available. Book your free consultation today.
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