Capital Acquisitions Tax changes introduced in Budget 2025 have altered the landscape for Irish families planning wealth transfers. Here is what you need to know about CAT thresholds in Ireland — and what you should be doing now.
What Is Capital Acquisitions Tax?
Capital Acquisitions Tax (CAT) is the Irish tax applied to gifts and inheritances. If you receive a significant gift during someone’s lifetime, or an inheritance after their death, and the value exceeds your available tax-free threshold, you will pay CAT at a rate of 33% on the excess. For many Irish families, this comes as an unpleasant surprise — particularly given the dramatic increase in property values over recent decades.
The CAT Thresholds in Ireland for 2026
CAT thresholds in Ireland are structured around three categories, known as Groups, each with its own lifetime tax-free threshold:
- Group A (€400,000): Applies to gifts and inheritances received from a parent. This threshold was increased in Budget 2025 from €335,000 to €400,000.
- Group B (€40,000): Applies to gifts and inheritances from brothers, sisters, grandparents, grandchildren, aunts, uncles, nieces, and nephews.
- Group C (€20,000): Applies to all other relationships — including unmarried partners, friends, and non-related individuals.
These CAT thresholds are lifetime thresholds, not annual limits. If you receive multiple gifts or inheritances from the same category over your lifetime, they all count towards the same cumulative allowance. Many people are unaware that gifts received since 5 December 1991 count towards the threshold, meaning a small gift received decades ago can reduce your available exemption today.
Why Property Prices Make CAT Planning Urgent
For many Irish families, the bulk of a parent’s estate consists of the family home. In Dublin and other major cities, property values have risen significantly, meaning that even modest estates can now breach the Group A threshold of €400,000. A semi-detached family home in South Dublin or Cork City may alone be valued at or above this level, with additional assets such as savings, investments, or holiday properties pushing well beyond it.
At a 33% CAT rate, a beneficiary inheriting an estate valued at €600,000 could face a tax bill in the region of €66,000 on the excess above the threshold. Without planning, this liability may force the sale of the very asset being inherited.
Key Exemptions and Reliefs
Irish tax law contains a number of important exemptions that can significantly reduce or eliminate a CAT liability when used correctly:
Dwelling House Exemption
If a child or qualifying individual has lived in the family home as their principal private residence for at least three years before the inheritance, and does not own another residential property, the family home may pass completely free of CAT. This relief is powerful but subject to conditions that must be carefully observed.
Agricultural Relief
Qualifying agricultural property — land, farm buildings, and livestock — may be eligible for an 90% reduction in its taxable value, dramatically reducing the CAT exposure on farm inheritances. The recipient must be a ‘farmer’ as defined in the legislation.
Business Relief
Similar to Agricultural Relief, Business Relief can reduce the taxable value of qualifying business assets by 90%. This is particularly relevant for owners of family companies who wish to pass the business to the next generation.
Small Gift Exemption
Each individual can receive gifts of up to €3,000 per year from any number of donors entirely free of CAT. While this is a relatively modest figure, it can be used systematically over many years to transfer wealth tax-efficiently within a family.
Section 72 Life Insurance for CAT
One of the most elegant solutions available for managing anticipated CAT liabilities is a Section 72 life insurance policy. These are whole-of-life policies specifically designed to provide a lump sum to meet a CAT bill on death. When structured correctly, the proceeds are paid free of CAT, meaning the policy benefit is used entirely to settle the liability rather than itself giving rise to a new one.
For older individuals or couples with significant estates, a Section 72 policy can be a highly cost-effective way to ensure that beneficiaries are not forced into distressed asset sales to meet tax obligations. The premium is effectively the ‘cost’ of spreading the tax liability over time.
How LHK Group Can Help
Inheritance and gift tax planning is a highly personal discipline that requires a thorough understanding of your family’s assets, relationships, and wishes. The financial planning team works with individuals and families to map out their estate, identify potential CAT exposures, and design structures — including Section 72 policies, lifetime gifting programmes, and trust arrangements — that protect wealth for future generations.
Click here for more information, and to speak to LHK Group’s financial planning team about CAT planning.Â
