THE INHERITANCE TAX changes in this year’s budget are “a step” in the right direction with Tánaiste and finance minister Simon Harris telling The Journal that the government plans to build on it in future budgets. 

Since new budget measures were voted in on Tuesday night, the threshold at which capital acquisitions tax kicks in has increased.

A child can now inherit €420,000 from their parents in their lifetime before capital acquisitions tax of 33% kicks in – up from €400,000 previously. 

The threshold for siblings, nieces, nephews and some other relatives has also increased from €40,000 to €44,000.

For non-relatives, the threshold has increased from €20,000 to €22,000.

Asked about the changes after the budget announcement on Tuesday, Harris said the government could not go further as the fiscal space available in the budget would not allow it this year.

Additional movement on the thresholds “would have cost a lot more than we had available,” said Harris.

Once it was decided by the government that the budget must include a personal tax package, there was limited scope for other measures, with Harris stating that he was pleased he managed to get increases in all three inheritance categories.

Speaking about the changes made, Harris added: 

It is a step and I hope it is something we can build on in the years ahead.

Inheritance tax has seen significant changes in Ireland following the 2008 financial crisis.

In 2008, people in Group A could inherit over €521,000 tax-free, before a tax of 20% was charged.

Between 2008 and 2012, tax-free thresholds on inheritances were steadily decreased while the rate of CAT was increased. 

Harris acknowledged that the changes made on budget day will not satisfy those who want equalisation of the inheritance tax system, particularly those who do not have children and want reforms so they can leave assets to a chosen beneficiary. 

TDs advocate for people who do not have children

During the vote on Tuesday evening on the inheritance tax changes, a number of TDs criticised the government for not taking the opportunity for wider reforms to the system. 

Independent Ireland TD Michael Collins said there were a lot of promises and soundings made that have not been delivered on.

“The bottom line is that this needs to be looked at again. I am pleading with the minister to look at it again and to give everybody a chance,” he said. 

Kerry TD Michael Healy-Rae said he warmly welcomed the changes.

However, he added:

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“People who get married, or not, and who do not produce children of their own and do not have what we call direct heirs, those people work very hard. It might be their own house or a second house, or it might be a farm of land and when they eventually pass on, they see their asset being devalued so much because whoever they give it to will have to pay so much inheritance tax on it.

“I know that everything cannot be done all together at the same time but I would be very much hoping that in the future, we will be able to look at those categories of people and do something more to help them.”

However, Sinn Féin’s David Cullinane said he was not in favour of the inheritance tax changes, stating that “Fine Gael represents a cosseted, privileged class”.

“I do not know of many people who are looking for changes to inheritance tax… 

“The scandalous part about this resolution is that if a house is sold for €800,000 and two children benefit from it, they will not pay a single cent in inheritance tax,” he said.

People Before Profit TD Paul Murphy said only a small number of people are impacted by inheritance tax.

“Most people do not get that. Only a third of people get any substantial inheritance whatsoever in the course of their entire lifetime. The average inheritance that people get is about €100,000,” he said.

“It is the most well-off, most comfortable people who will benefit from this tax change at a time when the majority of people are struggling with the cost of living crisis,” added Murphy. 

Poll: Were you happy with the inheritance tax changes in this year’s budget?