Inheritance tax in Ireland, formally known as Capital Acquisitions Tax (CAT), is one of the most misunderstood and underplanned aspects of personal finance. Every year, Irish families are caught off-guard by a significant tax bill following the death of a loved one, simply because no one had put proper estate planning in place.
At Money Sense Financial Services in Killarney, Co. Kerry, our inheritance tax advisors help families across Ireland take control of their estate planning, so that more of what you’ve worked hard to build goes to the people you love, and less is lost to unnecessary taxation. This guide covers everything you need to know in 2025.
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What Is Capital Acquisitions Tax (CAT) in Ireland?
Capital Acquisitions Tax (CAT) is a tax on gifts and inheritances received in Ireland. It is charged at a flat rate of 33% on the value of any inheritance or gift above your applicable tax-free threshold.
The key concept to understand is that the tax-free threshold, known as the Group Threshold, depends on your relationship to the person who has died (the ‘disponer’), not on the total value of the estate. This means two siblings could receive the same inheritance from their parent, but if one of them has already received previous gifts from that parent, their tax-free amount could be different.
CAT Group Thresholds for 2025
Revenue updates the CAT thresholds periodically. For 2025, the thresholds are as follows:
| Group | Relationship to Disponer | Threshold (2025) |
| Group A | Child (incl. stepchild) | €400,000 |
| Group B | Brother, sister, niece, nephew, grandchild | €40,000 |
| Group C | All others (friends, distant relatives) | €20,000 |
It’s important to note that these thresholds are cumulative over a lifetime. Every gift or inheritance you receive from a disponer within the same group counts towards the threshold, including those received years or decades ago.
Key Exemptions from Inheritance Tax in Ireland
There are several important exemptions that can significantly reduce, or even eliminate, a CAT liability. Understanding these is essential for effective estate planning.
Spouse Exemption
Any gift or inheritance passed between spouses or civil partners is completely exempt from CAT, regardless of the amount. This makes it critical to consider the ownership structure of assets, particularly the family home, when planning your estate.
Dwelling House Exemption
This is one of the most valuable and frequently misunderstood exemptions. A family home can be passed on free of CAT to a child (or other qualifying beneficiary) provided specific conditions are met: the beneficiary must have lived in the property as their main residence for the 3 years prior to the inheritance, must not own another residential property, and must continue to live in the property for 6 years after the inheritance.
If these conditions are not met, for example, if the child owns their own home, the exemption won’t apply and CAT will be due on the value of the property over the threshold.
Agricultural Relief
If you’re inheriting agricultural property or land, you may be entitled to Agricultural Relief, which can reduce the taxable value of the inheritance by 90%. Qualifying conditions apply and must be carefully reviewed by an advisor.
Business Relief
Similarly, business assets transferred on death may qualify for Business Relief, reducing the taxable value by 90%. This can make a massive difference when passing a family business to the next generation, but again, the qualifying rules are strict and professional advice is essential.
Small Gift Exemption
Each person can receive up to €3,000 in gifts per calendar year from any individual without it counting towards their CAT threshold. This is a simple but powerful planning tool, a couple could give each of their children €6,000 per year tax-free, which over a decade amounts to €60,000 per child, entirely outside the CAT system.
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How to Reduce Inheritance Tax: Practical Strategies
Effective inheritance tax planning is not about avoiding obligations, it’s about ensuring your estate is structured in the most efficient way possible so your family is protected. Here are the most commonly used strategies:
- Annual gifting using the €3,000 small gift exemption to gradually transfer wealth tax-free
- Ensuring the family home qualifies for the Dwelling House Exemption where possible
- Reviewing the ownership structure of assets, particularly between spouses, to maximise exemptions
- Using life insurance policies written under Section 72 trust to provide funds specifically earmarked to pay a CAT bill, so heirs don’t have to sell assets
- Exploring agricultural or business relief for qualifying assets
- Making pension nominations correctly, pensions can be powerful estate planning tools as they typically fall outside your estate for inheritance tax purposes
- Reviewing wills and powers of attorney to ensure they reflect your current wishes and are tax-efficient
Section 72 Life Insurance: The Most Practical Inheritance Tax Solution
One of the most straightforward and effective solutions for inheritance tax planning is a Section 72 life insurance policy. This is a specific type of life insurance policy taken out with the express purpose of providing funds to pay a CAT liability on death.
The key advantage is that the proceeds of a Section 72 policy are completely exempt from CAT, meaning your heirs receive the insurance payout specifically to pay the tax bill without it creating additional tax exposure. The policy is set up in the correct trust structure and can be tailored to match your estimated CAT exposure.
Our protection advice team can discuss Section 72 options alongside your broader estate planning strategy and calculate the appropriate level of cover needed.
The Role of Pension Planning in Inheritance Tax
Many people don’t realise that pension funds are one of the most tax-efficient ways to pass on wealth in Ireland. In most cases, your pension fund falls outside your estate for inheritance tax purposes, meaning it won’t be subject to CAT in the same way as other assets.
However, the nomination of pension benefits is critically important. If you nominate your spouse, they can receive the pension fund tax-free. If you nominate children, they may be subject to income tax on withdrawals. Getting the nomination right, and aligning your pension with your broader estate plan, is essential. Our pensions advice and retirement planning services cover this in detail.
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Why Early Planning Makes All the Difference
One of the most important lessons in inheritance tax planning is that the earlier you start, the more options you have. Many of the most effective strategies, such as annual gifting, Section 72 policies, and restructuring asset ownership, take time to have maximum impact.
Waiting until you’re ill or elderly significantly limits what can be done and may mean your family faces a substantial, entirely avoidable tax bill. The ideal time to start estate planning is now, regardless of your age or the size of your estate.
At Money Sense, we work with clients at every stage of life to develop and regularly review their estate plan. We’ll ensure it remains relevant as circumstances change, marriages, births, property purchases, business changes, and that your family is always protected.
Frequently Asked Questions About Inheritance Tax in Ireland
1. How much can I inherit tax-free from my parents in Ireland in 2025?
In 2025, you can inherit up to €400,000 from a parent (Group A threshold) without paying Capital Acquisitions Tax. This is a lifetime cumulative threshold that includes all gifts and inheritances from either parent over your lifetime.
2. Do I pay inheritance tax if I inherit my parent’s house in Ireland?
If you qualify for the Dwelling House Exemption, meaning you lived in the property as your main home for 3 years before the inheritance and don’t own any other property, the house can be inherited completely free of CAT. If you don’t qualify, the value above the Group A threshold will be subject to 33% CAT.
3. What is the CAT rate in Ireland?
Capital Acquisitions Tax (CAT) in Ireland is charged at a flat rate of 33% on the value of any gift or inheritance above your applicable group threshold.
4. Can I use a pension to reduce inheritance tax in Ireland?
Yes. Pension funds generally fall outside your estate for CAT purposes. By holding wealth within a pension, you can pass it on more tax-efficiently, particularly to a spouse. However, pension nominations must be correctly structured, so professional advice is essential.
5. What is a Section 72 life insurance policy?
A Section 72 policy is a life insurance plan specifically designed to provide tax-free funds for paying a Capital Acquisitions Tax bill. The proceeds of the policy are exempt from CAT, meaning your heirs can use the insurance payout to cover the tax without creating additional tax liability.
6. Do I need a solicitor or a financial advisor for inheritance tax planning?
Both play important roles. A solicitor handles the legal aspects, wills, trusts, and powers of attorney. A financial advisor handles the financial planning, pensions, insurance, investment structures, and tax-efficient asset allocation. For comprehensive estate planning, you need both working together. At Money Sense, we work closely with legal professionals to ensure our clients receive joined-up advice.
Protect Your Family’s Financial Future, Talk to Money Sense Today
Inheritance tax planning is one of the most meaningful things you can do for your family. It ensures that the wealth you’ve built over a lifetime is passed on as efficiently as possible, preserving your legacy and protecting your loved ones from unnecessary financial strain at an already difficult time.
Money Sense Financial Services brings together deep expertise in Irish tax legislation, pension planning, and estate structuring to give our clients a complete, co-ordinated plan. We’re regulated by the Central Bank of Ireland, independent, and entirely on your side.
Book your free inheritance tax review today and take the first step towards protecting everything you’ve built.
| Money Sense Financial Services | Killarney, Kerry | Regulated by the Central Bank of Ireland |
