Inheritance tax: an Irish guide

The tax on a person’s estate after they’ve died is called inheritance tax (IHT), which is a type of Capital Acquisitions Tax (CAT). In this article, you’ll discover what inheritance tax is, who has to pay it, how it’s calculated and if there are ways you may be able to reduce the amount you’ll pay in 2023.

Inheritance or Capital Acquisitions Tax (CAT) is the tax payable on the estate of someone who has passed away. Estates are made up of various assets, for example, money, property, pensions and possessions. How much tax you’ll need to pay will depend on the entire value of the estate. 

You can receive gifts and inheritances up to a set value over your lifetime before having to pay Capital Acquisitions Tax. Once due, it is currently charged at the rate of 33%, as of 6 December 2012.

It falls to the recipient or beneficiary to pay the inheritance tax (IHT), and is applicable to all property in Ireland.

Capital Acquisitions Tax is also payable by the recipient on property located outside of Ireland if the person either giving or receiving the inheritance is resident in Ireland for tax purposes.

Inheritance tax must be paid by the 31st October for any inheritance dated in the year to the 31st of the previous August.

This means that if you inherit a property any time between 1st September and 31st August, you must pay capital acquisitions tax by the 31st October. 

For example, if you inherit a property on 3rd September 2023, you will have to pay CAT by 31st October 2024. If you inherit on 30th August 2023, you will still have to pay CAT by 31st October 2023.

You must complete form IT38 for a gift or inheritance tax return, and you can pay CAT online. Note that you will be charged a percentage of the tax you owe if you pay late, as is the case with late payments on other types of taxes.

The standard rate for inheritance tax in Ireland in 2023/24 is 33%. 

However, there are exemptions to paying inheritance tax (more on those below). These exemptions depend on the relationship between the recipient of the inheritance and the person you are inheriting from.

A disponer is the person who gives you the gift or inheritance, and the beneficiary is the person who receives the gift or inheritance. A gift become inheritance if the disponer dies within two years of giving the gift.

Firstly, gifts and inheritances given or received by a civil partner or spouse are exempt from CAT. If you are a widow, widower or a surviving civil partner, you may be eligible to additional relief. You also do not need to pay CAT on a gift with a value of €3,000 or less from any one person in any one calendar year.

Tax-free thresholds depend on your relationship with the disponer (the person giving the gift or inheritance).

Tax-free thresholds

Group A – a tax-free threshold of €335,000. This threshold applies if you, as a beneficiary, are:

• A child, including adopted, step- and foster (in some circumstances), of the disponer or the disponer’s civil partner
• A minor grandchild of the deceased disponer if their child (your parent) is also deceased
• A parent inheriting an absolute interest of an inheritance on the death of your child

Group B – a tax-free threshold of €32,500. This threshold applies if you, as a beneficiary, are:

• A parent of the disponer, where you take limited interest or a gift
• Siblings of the disponer
• A child of a brother or sister of the disponer
• Nieces and nephews of the disponer
• A lineal ancestor, such as a grandchild of the disponer

Group C – a tax-free threshold of €16,250. This threshold applies if you, as a beneficiary, are:

• Someone with a relationship to the disponer, on the date of the gift or inheritance, that isn’t covered in the above groups.

Additional inheritance tax exemptions

There are also three instances in which you may be exempt from paying any inheritance tax.

1. If you have inherited a property at some point since 25th December 2016 and you meet all of the following criteria:
   • You lived in this property and it was your main residence for three years before your donor’s death
   • The property was the donor’s only home
   • You do not own another house, including another house you may have received in the same inheritance
   • You reside at this property and it’s your main home for six years after you receive the inheritance (unless you are aged over 65)
2. If your inheritance comes from your spouse or civil partner
3. If the deceased is a child who has taken a non-exempt gift or inheritance from a parent within the previous five years, the parent is then exempt from inheritance tax