AMENDING THE INHERITANCE tax system in the next Budget is understood to be something a number of both Fianna Fáil and Fine Gael backbenchers will be pushing for.

In particular, the estates of people with no children is understood to have been raised by a number of TDs.

The Tax Strategy Group, an expert advisory panel at the Department of Finance, noted in its most recent paper that the point has been made that people who are not related could have “equally close and meaningful relationships similar to familial relationships”.

It outlined that ‘chosen relationship’ legislation could allow individuals with no children select one or two heirs to their estate under the same grouping as parent and child.

Independent Ministers of State Michael Healy-Rae and Marian Harkin have both raised the issue with Minister for Finance Paschal Donohoe, the Irish Times recently reported.

However, some within Fianna Fáil and Fine Gael are also understood to also be in favour of a change.

Fianna Fáil’s John Lahart told The Journal that he would like to see reforms in this area, stating:

“I would be hugely sympathetic because I’m actually in that situation myself.”

Lahart said he has nieces and nephews and he would like to leave something to them that could have a significant impact on their lives.

“So I would have a huge personal sympathy, and I’ve said that to the people who are organising it, but I’m clearly not the minister [for finance].

“To me, it’s an anomaly. It could be put to really good use. They could bring in particular caveats and rules to it as to how it could be passed on, like perhaps it would have to be invested in x and y. I think we could be creative and innovative with it,” he said.

“A lot of people in this situation just don’t want to see their lifetime savings or investments swallowed up by the taxman,” added Lahart.

“I have seen people who’ve had to sell properties because they were left a property. The other part of it as well is that that tax has to be paid in the tax-year or by a certain date, there doesn’t seem to be any wriggle room,” he said.

A number of other TDs are understood to be hearing from constituents on the matter, with a number of politicians recently asking the finance minister if changes could be introduced.

Threshold changes

Both Fianna Fáil and Fine Gael made a number of pledges in their election manifestos around inheritance tax, also known as Capital Acquisitions Tax (CAT).

Fianna Fáil specifically pledged to review the inheritance tax thresholds applicable when the deceased does not have children.

The party also said it would increase and adjust the inheritance tax Category A, B and C thresholds in each budget “to reflect the wider increase in property prices in the Irish economy in recent years”.

Meanwhile, Fine Gael will said it would increase Capital Acquisitions Tax thresholds and raise Group A threshold (for children) to €500,000, Group B (for siblings) to €75,000, and Group C (for others) to €50,000, “building on the progress made in Budget 2025″, it said.

When it comes to increasing the thresholds, which were changed in the last budget for the first time in five years, it is understood a number of Fine Gael TDs are in favour of increasing the €400,000 threshold for Group A, which applied to children.

Tánaiste Simon Harris has previously said changes to inheritance tax “deserve to be considered” stating that there are issues around “unfairnesses” and “anomalies” with inheritance tax, as well as issues around inheriting farms needs to be considered.

Lahart told The Journal that he would have “more sympathy” for those with children and situation they find themselves in, stating that the inheritance thresholds for children at €400,000 “is really generous” and a “big threshold”.

Lahart is not the only Fianna Fáil TD looking for CAT changes.

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Gift exemption rise to €5,000

The TD for Dún Laoghaire-Rathdown, Cormac Devlin, has this week called for the Small Gift Exemption under CAT to be increased.

CAT is charged on gifts and inheritances, but the Small Gift Exemption allows individuals to receive up to €3,000 per year tax-free from any one person.

Devlin said this threshold has not been revised in years, despite the sharp rise in housing, education, and everyday living costs.

He is now proposing that the annual exemption be raised from €3,000 to €5,000.

“Increasing the Small Gift Exemption from €3,000 to €5,000 is a simple but effective way to provide more meaningful support for families,” Devlin said, stating that the current threshold has been left unchanged for far too long.

He said the change would encourage families to transfer modest sums of wealth without being penalised by tax, giving younger people much-needed assistance at key life stages, such as saving for a deposit for a home.

“For example, a young person could receive €5,000 from each parent – €10,000 in total, without it affecting their lifetime tax-free thresholds or triggering a CAT liability,” he said.

“That kind of support could make a real difference towards covering college fees, putting money aside for a deposit, or simply easing day-to-day pressures.”

Any changes to inheritance tax and gift exemptions would come from the €1.5bn tax package that has been earmarked for October’s budget.

Donohoe recently noted that there would be a significant cost in making any further substantial changes to CAT.