THE TAX PAID by the least, which is talked about the most – step forward, inheritance tax.

The measure is debated endlessly in Ireland. What the thresholds should be set at. Whether the rates should be similar for direct children versus nieces and nephews. Whether it should exist at all.

It is once again at the forefront of the public consciousness after the government decided to raise the threshold in Budget 2027.

A child can now inherit €420,000 from their parents during their lifetime before capital acquisitions tax [the technical name for inheritance tax] of 33% kicks in. This was up from €400,000 the year before.

It also went up for nieces and nephews (€40,000 to €44,000) and non-relatives (€20,000 to €22,000).

It was the kind of moderate, incremental increase which really makes no one happy.

Those who see the charge as fair don’t want further threshold increases. The likes of Sinn Féin have pointed out that if a house is sold for €800,000 and two children benefit from it, neither will pay the charge.

Those who see the charge as fundamentally unfair don’t feel it went nearly far enough.

Tánaiste and finance minister Simon Harris has already signalled he wants the threshold to be raised once again, and various politicians such as Michael Healy-Rae agree.

The huge interest could be viewed as odd for a few reasons.

The most obvious is that only about somewhere around 0.2–0.3% of the Irish population pays inheritance tax in a given year.

Of course, that’s a bit misleading, as an inheritance is normally a once- or twice-in-a-lifetime event.

But the numbers are still extremely small – economist Barra Roantree previously estimated that under 3% of households will ever pay the charge.

This was back when the threshold was set at €335,000. As it has now risen to €420,000, it is possible that even fewer households will end up liable for it, although that will depend on inflation.

However, the point stands – the charge simply is not something most households will have to deal with. Compared to say, the rise in PRSI which came into force last week, which is a higher tax on every single worker in the country.

There are a few other figures which drive that point home.

Only about a third of Irish households have ever received a significant inheritance. Of those that have, the average amount was just under €100,000.

It’s worth noting that these figures are from back in 2020. But they still as the thresholds have been raised significantly since then, they still illustrate the same point.

For households which do get an inheritance, the vast, vast majority will not come close to the threshold for paying the charge.

It is also worth noting that it is a charge which is overwhelmingly paid by the well-off.

The net wealth of households which have received an inheritance or substantial gift is almost three times higher than those who have never received such a transfer.

Compare the top 20% of wealthiest Irish households to the bottom 20%. The top 20% are four times as likely to one day get a major inheritance.

Finally, it is also worth pointing out that inheritance tax is actually a tax on a transaction.

The official name for the charge, as referenced earlier, is ‘Capital Acquisitions Tax [CAT]’. While a bit clinical, it is accurate.

The core of the argument against the charge is that it is effectively a ‘double tax’. For parents who buy a home which ends up valued at, say, €800,000, they have already paid tax on the money used to pay for the property. Why should their child have to pay *again*? Because it is not *again* – the child has paid no tax on the asset.

You could argue that this is semantics. That, as the parents have already paid, the child shouldn’t have to. But these so-called ‘double taxes’ exist everywhere. Think of a worker’s wages. Upon receiving them, they pay income tax. Then with the same money, they buy a bar of chocolate in a shop. They pay VAT – meaning they pay yet another tax. Maybe they buy a property – they will pay stamp duty. Once they have a house, they will pay property tax yearly. And so on. Receiving a wealth transfer of over €420,000 is no different.

Of course, it is worth acknowledging that many people oppose CAT due to the fact that they see it as a tax on the ‘family home’. It is often portrayed as a charge which can force the recipient to sell their house just to cover a tax bill.

There are two points worth noting here. First, there is an exemption. Someone who has lived in a property for three years prior to inheriting it (and meets some other conditions) is not liable for CAT.

This ensures that a situation whereby an adult child is forced to move out of their family home once their parents die due to a large inheritance tax bill almost never happens.

Second, most CAT is not actually related to the family home.

Parent-to-child transfers account for about a third of all the CAT paid in Ireland. Almost all cases where the family home is left in an inheritance likely fall in this category.

This means that while about 3% of households are ever liable for CAT full stop, an even lower number will be liable for it due to the family home.

The big argument in favour of inheritance taxes is that they reduce inequality and prevent wealth snowballing throughout generations.

The evidence of this actually happening is modest, with international research suggesting that the end result depends on how the charges are designed.

But the real question goes back to how we started the article. Given that this is a charge which a tiny fraction of Irish households will ever pay, why do so many care?

The heart of the matter is that most view it as a charge which could impact their homes, especially as property prices continue to surge. As about two-thirds of Irish households are homeowners, this makes CAT very personal.

It is worth remembering that the big jump in thresholds from €335,000 to €400,000 came from angst over the rise in (mainly Dublin) property prices.

Irish people have a deep connection to the land, through a variety of cultural and historical factors. It doesn’t matter that the actual number of ‘family homes’ impacted by CAT is low.

As long as that number isn’t zero, expect the controversy, public interest and political back and forth over the charge to continue for the foreseeable future.