Dáil Éireann Debate, Thursday - 25 June 2026
12. Deputy Michael Cahill asked the Tánaiste and Minister for Finance if he will be reviewing the group B and group C thresholds under capital acquisitions tax; and if he will make a statement on the matter. [48383/26]
Amharc ar fhreagraI raise again the issue of inheritance tax and the anomalies that exist for parents and their children, on one hand, and childless adults, their brothers, sisters, nieces and nephews, on the other.
I thank Deputy Cahill for the question. This is an important issue on which I have had several meetings. Capital acquisitions tax, CAT, is a tax which applies to both gifts and inheritances, and is charged at a rate of 33%. For CAT purposes, the relationship between the person giving a gift or inheritance and the person who receives it determines the maximum amount, known as the group threshold, below which CAT does not arise. The group thresholds were most recently increased in budget 2025.
Deputy Cahill will remember the group A threshold increased to €400,000 from €335,000. This broadly applies to where the beneficiary is a child of the disponer. The group B threshold increased to €40,000 from €32,500. This threshold applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or descendant of the disponer. The group C threshold increased to €20,000 from €16,250, with this threshold applying in all other cases.
Along with tax-free group thresholds, various reliefs and exemptions are available in relation to CAT, including agricultural relief, business relief, the small gift exemption, favourite niece or nephew relief and the dwelling house exemption. It is important from a tax policy perspective to maintain stability and certainty and to ensure that the CAT thresholds are appropriately set in the context of the range of reliefs available.
There is a significant associated cost with further changes to the group thresholds, whether it involves increasing thresholds or reforming the inheritance tax category system, for example, bringing those who are childless within the scope of the group A threshold. Department of Finance officials produced a tax strategy group paper last year which examined that as well. We will do this again as part of our tax strategy group papers this year, and publish information and costings.
I recognise the burden of this tax. I have had some good meetings with groups which are concerned about this. The Deputy should note that capital acquisitions tax group thresholds are kept under review annually through the finance Bill and annual budget.
I have raised this issue on a number of occasions. It is a huge issue and there are anomalies. We need to address this. Currently, children inheriting a family home from their parents are exempted from inheritance tax up to €400,000, which, considering the price of homes currently, is undoubtedly far too low. However, a major anomaly exists when it comes to childless couples and individuals, who often decide to leave their home and assets to their nieces and nephews, brothers and sisters. Unlike children inheriting from parents, nieces, nephews, brothers and sisters are only entitled to €40,000 tax-free, leaving them with a significant tax bill which often precludes these individuals from affording the property. At a time when this country is in the midst of a housing crisis, should we not be doing everything possible to ensure that families are able to afford to keep their homes, instead of penalising those who do not have children and those who are left assets by their uncles and aunts? I call on the Tánaiste, in his capacity as Minister for Finance, to reduce inheritance tax, which is charged at a flat rate of 33% of the value of assets exceeding specific relationship-based tax-free thresholds, and to significantly increase those thresholds, of €400,000 in the case of a son or daughter.
I appreciate this is a serious issue which causes stress, strain and worry to many people. I have had much engagement with colleagues and groups about this and continue to do that. We keep all these issues under review as part of the finance Bill each year. The tax strategy group will again look at these issues this year. We will publish data, information and costings that can help to inform the debate in these Houses. The only thing I have to say, to be honest with people, is that some of these moves are quite expensive. We will have to decide as a collective, whatever the size of the total tax package in this budget is, which we will publish in the summer economic statement, how we divide that, with all of the competing demands regarding tax. I am aware of the burden that this places on people. There were significant increases in thresholds under the previous Government. I hope that we can make some progress on this over the course of this Government. Whether it is in this budget or other budgets is a matter for the Government to consider in the time ahead.
I believe we should separate the limit on the house from any other inheritance. The €40,000 cap in the case of a niece, nephew, brother or sister is absolutely ridiculous and discriminatory. In the upcoming budget, I propose that the Minister increase the €40,000 cap and we separate the house from the inheritance. The bands are less today than they were 15 or 16 years ago, as they were reduced during the recession. If the value of the house and any other assets is over €600,000, a son or daughter is liable for a €66,000 capital acquisition tax on the very same inheritance. A niece, nephew, brother or sister is liable for €184,8000. Our parents, grandparents and their parents before them worked extremely hard and paid their taxes to provide for their families and build family homes. The same applies to our uncles and aunts and their people before them. They too worked extremely hard and paid their taxes. I believe this issue needs to be addressed urgently. It is also a huge issue for the farming community and farm succession. It is a form of double taxation. I have a huge issue with it.
Deputy Cahill certainly gives that very clear impression. I know this is a serious issue and I hear from colleagues on the Government and Opposition benches about it. I share some of that concern too. In the specific role that I hold, I have to be honest about balancing the competing demands. We will have a certain amount available for tax measures and we will have many things that different people want to do. Inheritance tax is one that is coming up. Personal income tax is also coming up. We will have to look at all of this in the round.
The Deputy and I have both been in government in the past, so we have made progress on this issue, including in the previous Dáil. This Government has four more budgets to deliver, so the next budget will be one of four. How we divide up the tax package and what we can or cannot do to reform CAT this year will have to be decided and informed by discussions we have about the priorities. I am not ruling anything out today. I know people who have concerns about this will also understand that it is a matter for 6 October, when we unveil the budget, from a tax and spending point of view. I will continue to engage with Deputy Cahill.
