When it comes to taxation, nothing is ever simple. But if you want to save money, it pays to know the basics. Here are some key pointers about inheritance tax in Ireland.
Capital Acquisitions Tax, the official name for inheritance tax in Ireland, is paid by the recipient of gifts or inheritances of money or property. If you inherit between January and August, you have to pay Revenue by the end of October that same year. If you inherit between September and December, you have to pay by the end of October the following year.
You must pay 33% of the value of the inheritance over and above a lifetime exemption or threshold level. These thresholds, updated to include Budget 2020 changes, are as follows.
Where the beneficiary is a child or a parent, the tax free threshold is €335,000.
Where the beneficiary is a brother, sister, nephew, niece or grandchild, the tax free threshold is €32,500.
Where the beneficiary is a cousin or a stranger, the tax free threshold is €16,250.
Want to Reduce the Bill?
- Pass on property earlier – the longer you leave it, the larger in value it grows and the larger the ultimate tax bill for your children.
- If possible have your child move into the main home earlier – if they live there for 3 years before inheritance then the home is excluded from the taxable estate.
- Consider a Section 72 or 73 Insurance Policy – specifically designed to pay inheritance tax.
- Start annual gifting of up to €3k (per parent and per child / grandchild) – this is exempt from the tax.
- Maximise threshold exemptions by spreading the inheritance among children, sons/daughters-in-law and grandchildren.
- If you own a farm or a business, there are important exemptions you should know about.
- Setting up a trust can in certain situations maximise tax efficiency.
- Get married – passing assets to your spouse is tax exempt.
- And don’t forget to write a will.
If you like this article, try this one: Making a Will