Inheritance tax can take a big bite out of what you pass on — but with a bit of planning, much of it can be reduced or avoided legally. Here’s a clear, plain-English guide to how Capital Acquisitions Tax (CAT) works in Ireland in 2026, the tax-free thresholds, and the main ways to cut the bill.
What is inheritance tax in Ireland?
In Ireland, inheritance tax is charged through Capital Acquisitions Tax (CAT). The rate is 33%, and it’s paid by the person receiving the gift or inheritance, not the estate. The good news is that everyone has tax-free thresholds — you only pay CAT on the value above your threshold.
The tax-free thresholds (2026)
How much you can receive tax-free depends on your relationship to the person giving it. There are three groups:
| Group | Who it covers | Tax-free threshold |
|---|---|---|
| Group A | A child inheriting from a parent | €400,000 |
| Group B | Brothers, sisters, nieces, nephews, grandchildren | €40,000 |
| Group C | Everyone else (e.g. friends, cousins) | €20,000 |
These are lifetime thresholds — they add up all the gifts and inheritances you’ve received within each group since 5 December 1991. Anything above the threshold is taxed at 33%.
A worked example
Say a child inherits €500,000 from a parent. The Group A threshold is €400,000, so the first €400,000 is tax-free. CAT applies to the remaining €100,000 at 33%, giving a bill of €33,000. Careful planning during the parent’s lifetime could reduce or even remove that bill.
The main reliefs and exemptions
- Spouses and civil partners pay no CAT. Anything passing between them is completely exempt.
- The Small Gift Exemption. Anyone can give anyone else up to €3,000 a year completely tax-free — and it doesn’t touch their lifetime threshold. Two parents can give a child €6,000 a year between them.
- Dwelling House Exemption. A home can pass tax-free in certain cases, for example to someone who has lived in it for the previous three years and doesn’t own another property (conditions apply).
- Business and Agricultural Relief. These can reduce the taxable value of a qualifying business or farm by up to 90%.
- Section 72 life cover. A special type of life insurance policy whose payout is used to pay an inheritance tax bill — and, if set up correctly, is itself exempt from CAT.
How to reduce inheritance tax legally
- Use the €3,000 Small Gift Exemption every year. Over time, regular small gifts move meaningful money out of your estate tax-free.
- Plan ahead with a Section 72 policy so your family has the cash to pay any CAT without selling the family home or other assets.
- Make the most of the thresholds and reliefs that apply to your situation, including Dwelling House and Business/Agricultural Relief where relevant.
- Keep good records of gifts given and received, so thresholds are tracked correctly.
- Get advice early. The best inheritance tax planning happens years in advance, not after the event.
Talk to Greenway about your plan
Inheritance tax is one of the most avoidable taxes in Ireland — but only with planning. We can look at your situation, work out the likely bill, and put a simple plan in place to protect what you pass on to the people you love.