Rising property prices expose more people to ‘significant’ inheritance tax bills, warns adviser

Rising property values are progressively exposing more people to potentially “significant” capital acquisitions tax (CAT) liabilities, Grant Thornton Ireland has said, and the Government should examine “targeted reform” of the regime to reduce the burden on some taxpayers. The accountancy firm said its analysis of data from Revenue revealed that more than half of the €1.12 billion the State collected in CAT last year was generated by beneficiaries entitled only to the lowest tax-free thresholds.Under the current system, beneficiaries of inheritance are categorised into groups A, B, and C. Group A applies to children, who can receive gifts and inheritances from each parent up to a lifetime threshold of €400,000 before CAT becomes payable. The threshold for Group B, which typically applies to inheritance received by siblings, nieces, nephews, grandchildren and grandparents, is €40,000. Group C, which applies to friends, unmarried partners and other beneficiaries, has a threshold of €20,000. READ MOREAmounts above these thresholds are subject to CAT of 33 per cent. Grant Thornton said its analysis of the Revenue data revealed that beneficiaries in groups B and C generated almost €570 million of inheritance tax receipts in 2025, compared with €399 million from beneficiaries in Group A. The balance is money relates to gift tax. From kitchen counter to supermarket shelves, the rise of Ballymaloe FoodsThis means “that almost 59 per cent of all inheritance tax collected came from recipients outside the parent-child threshold category”, the firm said, highlighting the “imbalance” in the current regime. “The issue has become more striking as residential property values have increased,” said Julia Considine, private client partner at Grant Thornton Ireland. “Someone can inherit what may be a relatively ordinary family home but, depending on their relationship to the person leaving that behind in their will, only a small fraction of its value may fall within their tax-free threshold.“The tax treatment of an inheritance can vary enormously depending on whether the beneficiary is a child, sibling, niece, nephew or long-term partner. Yet family circumstances in Ireland have changed dramatically in recent years, and the tax system needs to better recognise that reality,” she said.Last week, Minister for Public Expenditure Jack Chambers effectively ruled out the equalisation of inheritance tax thresholds between children and other relatives in the upcoming budget.“I acknowledge there is a significant campaign around this which is concentrated on category B,” Chambers told the Dublin Economics Workshop event in Wexford.“The cost of equalising inheritance tax between category A and B is hundreds of millions of euro, far outside of what’s available in our tax package,” Chambers said.“We have discussed, and are considering, broader adjustments to inheritance tax across different categories, but it will be within what’s available.” Minister for Finance Simon Harris, meanwhile, said last week that income tax reforms would take up the bulk of the €1.5 billion tax package being prepared for announcement on budget day.Considine said that any changes to the CAT regime would cost the exchequer and must be considered within the wider fiscal environment. “The starting point, though, should be whether the system is fair,” she said.