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. 

Inheritance or capital acquisitions tax 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. 

It falls to the recipient 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 2022, you will have to pay CAT by 31st October 2023. 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 2022 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.

Tax-free thresholds

If you meet one of three thresholds, you may be eligible for a tax-free exemption of inheritance tax. These thresholds are:

1. Group A – a tax-free threshold of €335,000. This group of beneficiaries includes:
   1. Children, including adopted, step- and foster children
   2. A minor grandchild of the deceased if their child (the grandchild’s parent) is also deceased
   3. Parents who take inheritance from a child on their death
2. Group B – a tax-free threshold of €32,500. This group of beneficiaries includes:
   1. Siblings
   2. Nieces and nephews
   3. A lineal ancestor, such as a grandchild
3. Group C – a tax-free threshold of €16,250. This group of beneficiaries includes everyone else.

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:
   1. You lived in this property and it was your main residence for three years before your donor’s death
   2. The property was the donor’s only home
   3. You do not own another house, including another house you may have received in the same inheritance
   4. 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