| In Ireland, inheritance tax is called Capital Acquisitions Tax (CAT) and is charged at a flat 33% on the value of inheritances above the relevant group threshold. For a child inheriting from a parent (Group A), the current lifetime tax-free threshold is €400,000 (raised from €335,000 in the October 2024 Budget). A family home worth €500,000 inherited by an adult child with no other reliefs would therefore trigger a CAT bill of roughly €33,000 (33% of the €100,000 excess above the threshold).
The good news: Ireland offers several legitimate reliefs and exemptions that can eliminate or dramatically reduce the CAT bill on a family home. The most powerful is the Dwelling House Exemption, which can make the family home 100% CAT-exempt where the inheritor has lived in it for three years before and continues to live in it for six years after the inheritance, and doesn’t own or have an interest in any other dwelling. Other planning tools include the annual €3,000 Small Gift Exemption, Section 72 life insurance policies (which pay the CAT bill directly), Agricultural Relief and Business Relief (90% reductions where conditions are met), and full spousal exemption (unlimited). The right combination depends on the family’s circumstances, planning should start years before the inheritance is expected, not after. Key facts
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IN THIS ARTICLE
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The typical Irish family home is now worth enough to trigger a five-figure CAT bill unless the right relief is claimed.
For many Irish families, the family home is by far the largest asset in the estate. And under current Capital Acquisitions Tax Ireland 2026 rules, that home can quietly trigger a five-figure inheritance tax advice Ireland families genuinely need but often don’t seek until it’s too late. A €500,000 family home inherited by a single adult child with no exemption in place produces a CAT bill of roughly €33,000, payable within eleven months of the inheritance date, and increasingly often payable in cash the family doesn’t have available. This pillar guide explains how the CAT rules work in 2026, which reliefs apply to the family home in particular, and the specific planning steps that can eliminate or dramatically reduce the bill. Explore our Inheritance Tax Advice service or get in touch for a free estate planning review.
Quick answers: the eight questions families ask most about Irish inheritance tax
How much can you inherit tax-free in Ireland in 2026?
It depends on your relationship to the deceased. Group A (child from parent): €400,000 lifetime tax-free (as raised in Budget 2025, October 2024). Group B (sibling, niece, nephew, grandchild, ancestor): €40,000. Group C (anyone else): €20,000. Amounts above the threshold are taxed at 33%. Spouses are 100% exempt on inheritances from each other.
What is the CAT rate in Ireland?
A single flat rate of 33% applies to inheritances and gifts above the relevant group threshold. There are no tiers or bands — the excess is taxed uniformly at 33%.
What is the Group A CAT threshold for children in Ireland?
Currently €400,000, raised from €335,000 in Budget 2025 (announced October 2024, effective 2 October 2024). This is a lifetime cumulative threshold, all Group A gifts and inheritances received during your life (from all Group A donors) count against the same €400,000 allowance.
What is the dwelling house exemption in Ireland?
The Dwelling House Exemption (formally, the Dwelling House Relief) allows a beneficiary to inherit a house tax-free where all conditions are met: (1) it was the beneficiary’s only or main home for the three years before the inheritance; (2) the beneficiary doesn’t own or have an interest in any other dwelling at the time of inheritance; and (3) the beneficiary continues to occupy it as their main residence for six years after. Where met, the value of the dwelling house is fully excluded from CAT, potentially saving tens or hundreds of thousands.
How can I reduce inheritance tax in Ireland legally?
Six main tools: (1) plan around group thresholds by spreading assets across beneficiaries; (2) use the €3,000 Small Gift Exemption annually per donor per beneficiary; (3) qualify for Dwelling House Exemption on the family home; (4) qualify for Agricultural Relief or Business Relief (90% reductions); (5) take out a Section 72 life policy to pay the CAT bill; (6) use spousal transfers strategically. Combined, these tools can eliminate CAT in many family situations.
Does a spouse pay inheritance tax in Ireland?
No, 100% exempt, unlimited, on gifts and inheritances between spouses (including civil partners under the Civil Partnership Act). This means it is generally efficient to leave assets first to the surviving spouse, then to children on the second death, provided both estates are planned together.
What is a Section 72 policy in Ireland?
A Section 72 policy is a specific type of Irish life insurance policy whose proceeds are exempt from CAT if used to pay an inheritance tax bill arising on the death of the insured. Effectively, it lets the family pre-fund the CAT liability at a fraction of the eventual bill, the payout goes to the estate ring-fenced to pay Revenue, and doesn’t itself count as an inheritance in the beneficiary’s hands. Widely used by families with a large family home or business interest.
How does the €3,000 small gift exemption work in Ireland?
The Small Gift Exemption allows any person to receive up to €3,000 per year from any one donor completely tax-free, doesn’t count against the group threshold, doesn’t need to be declared. A married couple can therefore gift a child (or a grandchild) €6,000 per year tax-free (€3,000 each). Over 20 years, that’s €120,000 moved out of the estate CAT-free, per child.
The three CAT group thresholds every Irish family should know
Irish CAT is grouped by relationship, not by amount, which relatives inherit from you determines the tax-free base.
Group A — parent to child (€400,000)
Applies to inheritances or gifts from a parent to a child (including adopted, step and, in most cases, foster children where formally recognised). Also applies in some cases to minor grandchildren where the parent has predeceased. Increased from €335,000 to €400,000 in Budget 2025 with effect from 2 October 2024. This is a lifetime cumulative allowance across all Group A gifts and inheritances.
Group B — siblings, nieces, nephews, grandchildren (€40,000)
Applies to inheritances between siblings, from an aunt or uncle to a niece or nephew, from a grandparent to an adult grandchild, and from a child to a parent. The threshold is deliberately much lower than Group A, which is why sibling inheritances of significant property assets are often the most heavily taxed in Irish estates.
Group C — anyone else (€20,000)
Cousins, friends, unrelated beneficiaries and, in most cases, in-laws. Any inheritance or gift above €20,000 is taxed at 33%. This is why leaving significant assets to a non-family beneficiary requires particularly careful planning.
The Dwelling House Exemption — the single biggest CAT relief for Irish families
If any Irish CAT relief deserves a full section, it’s this one. The dwelling house exemption Ireland allows the family home to pass to a beneficiary completely CAT-free where three conditions are met throughout the relevant period.
Condition 1 — three years of occupation before
The beneficiary must have lived in the dwelling as their only or main residence for at least three years immediately before the inheritance date. This is what makes advance planning matter, an adult child who moves back into an ageing parent’s home only in the parent’s final months of life will not qualify.
Condition 2 — no other dwelling
At the time of the inheritance, the beneficiary must not own or have any beneficial interest in any other dwelling anywhere in the world. This includes small shares in holiday homes and inherited half-shares. Care is needed for beneficiaries who own investment properties or who have a partial interest in another home.
Condition 3 — six years of occupation after
The beneficiary must continue to live in the property as their main residence for six years after the inheritance date. Selling early triggers a clawback of the exemption (with limited exceptions for downsizing at 65+, moving abroad for work, or moving for care reasons).
Where all three conditions are met, the value of the dwelling house is entirely excluded from CAT. A family home worth €500,000, €750,000 or €1 million can pass to the qualifying child completely tax-free.
Where to get advice the Money Maximising Advisors group
| PART OF THE MONEY MAXIMISING ADVISORS GROUP
You are reading a guide from Money Sense Financial Services, the South West Ireland arm of the Money Maximising Advisors group. Two sister brands cover the rest of Ireland under the same Central Bank regulation: • moneysense.ie — Money Sense Financial Services (Killarney, Co Kerry) — family-run since inception, Brokers Ireland member, led by John Lenihan QFA with 40+ years in Irish financial services. • mmadvisors.ie — Money Maximising Advisors Limited (Tuam, Co Galway) — national coverage, HQ for the group, full product suite across mortgages, pensions, protection, savings and inheritance tax. • jcfc.ie — Joe Coyle Financial Consultants (Mountcharles, Co Donegal) — North West Ireland specialists, particular focus on business-owner protection, pensions and succession advice. |
Real-world scenario: a Killarney family reducing a €61,000 CAT bill to zero
| CASE STUDY: WIDOWED MOTHER + ADULT SON, KILLARNEY
Bridget is a widow in her late seventies with a family home in Killarney valued at €585,000, a modest ARF worth €70,000, and around €35,000 in savings. Her son Michael, single and in his mid-forties, moved back to Killarney in 2020 to help her after her husband’s death and has lived with her ever since, selling his own apartment in 2021 before doing so. Without planning, Michael would have inherited the home and other assets worth roughly €585k + €105k = €690k, a taxable excess of €290,000 above his Group A €400k threshold, and a CAT bill of €95,700 (33%). With Money Sense advice: (1) Michael’s existing three-plus years of occupation and non-ownership of any other dwelling qualified him for the Dwelling House Exemption on the €585k home; (2) Bridget then used the €3,000 Small Gift Exemption each year for three years to transfer €9,000 out of the ARF-adjacent savings tax-free; (3) Bridget put in place a €30,000 Section 72 policy that will pay the residual CAT bill on the remaining assets ring-fenced from her estate. Net expected CAT bill for Michael on the current position: effectively zero. |
Five legitimate ways to reduce Irish CAT on the family home
Killarney families use these five reliefs in combination — rarely alone.
1. Dwelling House Exemption
The single biggest CAT relief for the family home, described in detail above. Requires advance planning, the three-year occupation rule cannot be manufactured retrospectively.
2. Section 72 policy
A Section 72 policy Ireland families take out is a joint-life-second-death (or single-life) whole-of-life insurance policy whose proceeds are ring-fenced under Section 72 of the CATCA 2003 to pay the inheritance tax bill. The payout itself is CAT-free in the beneficiary’s hands. Best-suited to families with significant property or business assets that would otherwise trigger a forced sale to pay the CAT bill.
3. Annual €3,000 Small Gift Exemption
Each donor can give up to €3,000 per year to each beneficiary CAT-free. A married couple can therefore gift €6,000 per child per year (or €6,000 per grandchild per year), which, over 20 years and multiple children/grandchildren, moves significant sums out of the estate tax-free. Doesn’t count against the group threshold and doesn’t need to be reported.
4. Agricultural Relief and Business Relief
For qualifying agricultural property or trading business assets, 90% of the market value is disregarded for CAT purposes. Strict conditions apply (asset composition tests, active farmer / active director requirements, six-year holding periods). Widely used by farming families in Kerry and across Ireland to preserve intergenerational farm succession.
5. Spousal exemption + coordinated estate planning
Spouses are 100% CAT-exempt on inheritances from each other. Effective family planning generally passes assets first to the surviving spouse (tax-free), then structures the second death carefully around the group thresholds, Dwelling House Exemption and Section 72 cover.
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Wondering what CAT bill your family would face today, and how to reduce it legally? Book a free estate planning review with our Killarney team. → Contact Us | → Book an Appointment | → Call +353 64 6639164 |
Common inheritance tax mistakes Irish families make
- Assuming the family home is automatically exempt. It isn’t. The Dwelling House Exemption has three strict conditions, miss any one and 33% of the excess applies.
- Not planning early enough. The three-year occupation condition for the Dwelling House Exemption cannot be back-dated, planning must start years before, not months.
- Ignoring lifetime cumulative thresholds. Group A is €400k across your entire lifetime from all Group A donors. Early gifts eat into the eventual inheritance allowance.
- Forgetting the €3,000 small gift exemption. Over 20 years across grandchildren, this alone can move hundreds of thousands out of the estate CAT-free.
- Underusing Section 72 cover. A modest premium in the parents’ lifetime funds a large CAT bill on death, particularly protective where the estate is illiquid (property, business).
- Missing the Pay & File deadline. CAT is due by 31 October of the year following the valuation date, on Form IT38. Late filing triggers interest and penalties. Related reading
Frequently asked questions
When is the CAT bill actually due?
CAT arising on an inheritance is due on the Pay & File deadline of 31 October of the year following the valuation date, filed on Revenue Form IT38. Interest and penalties apply to late payment. For gifts and inheritances close to the deadline, the deadline may fall further out, a QFA or tax adviser will confirm the exact date for your case.
What happens if the beneficiary can’t afford the CAT bill?
Revenue may accept payment by instalments over up to five years (in the case of real property) with interest, or the beneficiary can raise money against the inherited asset (mortgage, sale of another asset). In practice, illiquid estates that haven’t used Section 72 cover often force distressed sales. This is why planning matters.
Do gifts received before death count against the inheritance threshold?
Yes. All gifts and inheritances received from Group A donors during your lifetime count cumulatively against the €400,000 threshold. This is why early gifts under the Small Gift Exemption (which does not count) matter — they don’t reduce your eventual allowance.
Are step-children treated as Group A?
Generally yes, step-children of a marriage or civil partnership are treated as Group A for CAT purposes. Foster children may qualify where certain conditions are met (typically five years of care before age 18). A Qualified Financial Advisor or tax adviser can confirm the position for a specific family.
Does the Dwelling House Exemption apply if the beneficiary inherits jointly?
Only the joint owner who meets the three conditions can claim the exemption in respect of their share. Where one joint inheritor qualifies and another doesn’t, careful planning is needed.
About Money Sense Financial Services
| REVIEWED BY: MONEY SENSE FINANCIAL SERVICES
This guide is reviewed by the advisors at Money Sense Financial Services, a family-run Killarney, Co Kerry advisory firm (Company Reg. 438085) regulated by the Central Bank of Ireland and a member of Brokers Ireland. Founder John Lenihan is a Qualified Financial Advisor (QFA) with over 40 years of experience across the Irish financial services industry, including 28 years in the banking sector. Director Mernie Lenihan leads compliance and administration. Money Sense is part of the Money Maximising Advisors group and works alongside sister brand jcfc.ie. Every recommendation is documented in a written Statement of Suitability. Read more about us. |
Ready for a free Irish inheritance tax review?
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Our team at Money Sense Financial Services works with Kerry, Cork and Ireland-wide families to review estate structures, Section 72 cover, Dwelling House Exemption eligibility and lifetime gifting strategies. Free first consultation, transparent fees. → Contact Us | → Book an Appointment | → Call +353 64 6639164 |
Important information
WARNING: This article summarises general Irish tax rules, individual CAT liabilities depend on specific circumstances and require personalised professional advice.
Money Sense Limited T/A Money Sense Financial Services is regulated by the Central Bank of Ireland.
CAT group thresholds (Group A €400,000, Group B €40,000, Group C €20,000), the 33% CAT rate, the Dwelling House Exemption conditions (three years before / no other dwelling / six years after), Section 72 policy exemption, €3,000 Small Gift Exemption, Agricultural Relief and Business Relief (90% reduction), spousal exemption and Pay & File deadline (31 October, Form IT38) referenced in this article reflect Irish tax law as at June 2026. The €33,000 illustrative CAT bill is a worked example on a €500,000 family home inherited by a single adult child with no exemption in place. Money Sense Financial Services is a Central Bank of Ireland-regulated advisory firm based in Killarney, Co Kerry (Company Registration Number 438085) and a member of Brokers Ireland. This article is for general information only and does not constitute personal financial, tax or legal advice, seek personalised advice from a Qualified Financial Advisor and, for larger estates, a tax adviser or solicitor before implementing any planning strategy.
