2026-05-26

I again raise the issue of inheritance tax and the anomalies that exist for parents and their children on the one hand, and childless adults, their brothers, sisters, nieces and nephews on the other hand. Currently children inheriting a family home from their parents are exempted from tax on inheritances of up to €400,000, which, considering the price of homes currently, is undoubtedly far too low. However, a major anomaly exists when it comes to childless couples and individuals who often decide to leave their home and assets to their nieces, nephews, brothers and sisters. Unlike children inheriting from parents, nieces, nephews, brothers and sisters are only entitled to €40,000 tax free leaving them with a significant tax bill, which often precludes these individuals from affording the property. At a time when this country is in the midst of a housing crisis, should we not be doing everything possible to ensure families are able to afford to keep homes instead of penalising those who do not have children and those who are left assets by their uncles and aunts? Tonight I am calling on the Tánaiste and Minister for Finance to reduce inheritance tax which is charged at a flat rate of 33% on the value of assets exceeding specific relationship-based tax-free thresholds and to significantly increase these thresholds of €400,000 to €800,000 in the case of a son or daughter and furthermore, to separate the limit on the house that I proposed, the €800,000, from any other inheritance. The €40,000 cap in the case of a niece, nephew, brother or sister is absolutely ridiculous and discriminatory. In the upcoming budget I propose that the Minister for Finance increase the €40,000 cap up to €250,000 on a house and again separate it from any other inheritance. These bands are less today than there were 15 or 16 years ago when they were reduced during the recession. If the value of the house and any other assets is €600,000, a son or daughter is liable for €66,000 in capital acquisition tax, or inheritance tax as it is known. On the very same inheritance a niece, nephew, brother or sister is liable for €184,800. Our parents, our grandparents and their parents before them worked extremely hard to provide for their families and build a family home. The same applies to our uncles and aunts and their people before them. They too worked extremely hard to build a family home and paid all their taxes I may add. Sadly, today in certain cases individuals are turning down inheritance as they simply cannot afford to pay the taxes. This issue needs to be addressed in the coming budget and successive budgets. It is obvious families and individuals are being taxed on the double. I call on the Government again tonight to urgently address another anomaly that exists with the current taxation system in respect of capital acquisition tax when applied to partners as opposed to married couples. Current legislation means a partner, even a lifetime partner, is regarded as a stranger for capital acquisition tax purposes and therefore the current threshold limit of €20,000 applies, with anything over that amount taxed at 33%, whereas married couples are exempted from that tax. Current legislation discriminates against partners. Partners are now entitled to a survivor's pension if they have been living together for at least five years or two years if they have children. This arose from a court case where it was found that to deny them survivor’s pension would be unconstitutional. In another recent case, a civil servant passed away and his partner was refused the widow’s portion of his Civil Service pension as they were not married and this was also found to be unconstitutional.

I thank Deputy Cahill for raising this matter in the House today. I also acknowledge his advocacy on this issue since his election to Dáil Éireann. Capital acquisitions tax, CAT, is a beneficiary-orientated tax that is payable by the recipient of a gift or inheritance as opposed to the person providing that gift or inheritance. CAT plays an important role in ensuring that we maintain a broad tax base. It raised €854 million in 2024 and approximately €1.1 billion in 2025. For CAT purposes, the relationship between the person giving a gift or inheritance, the disponer, and the person who receives it, the beneficiary, determines the maximum amount, known as the group threshold, below which CAT does not arise. The Finance Act 2024 increased each threshold, and the estimated cost was €88 million annually. The group A threshold, which in general applies where the beneficiary is a child of the disponer, increased to €400,000 from €335,000. It is useful to note that the definition for children for CAT purposes includes any stepchildren, adopted children or certain foster children. All can avail of the group A threshold in respect of gifts and inheritances received from that disponer. The Group B threshold increased to €40,000 from €32,500. This threshold applies where the beneficiary is a brother, sister, niece, nephew, lineal ancestor or lineal descendant such as a grandchild of the disponer. The group C threshold increased to €20,000 from €16,250, with this threshold applying in all other cases. It should also be borne in mind that where a person receives gifts or inheritances that are in excess of the relevant tax-free threshold, CAT at a rate of 33% applies on the excess benefit. It is important to be aware that there are significant costs associated with increasing the existing thresholds. For instance, a €100,000 increase in threshold A to €500,000 would cost in the region of €86.6 million, while an increase in threshold B to €60,000 would cost approximately €70.1 million. Last year in the CAT tax strategy group, TSG, paper, Department of Finance officials reviewed idea of combining thresholds A and B to bring relatives such as nephews, nieces, brothers and sisters within the scope of the higher threshold. As part of this exercise Revenue estimated the cost of merging group B with group A to be €305 million. These costs have been updated recently and it is estimated that such a change could now cost in the region of €349 million. The tax strategy group paper was published in advance of the budget and is the best means of considering issues such as inheritance tax in an analytical and transparent way. The tax strategy group is not a decision-making body and the papers produced by the Department of Finance are simply a list of options and issues to be considered in the budgetary process. Officials intend to include a further update of this matter in the tax strategy group papers later this year. I thank the Deputy for raising this issue and assure him that the Tánaiste is conscious of the burden of capital taxation and continues to engage with his officials on these matters. The capital acquisition tax group thresholds are kept under review annually by officials throughout the Finance Bill cycle.

I thank the Minister of State for his detailed response. I mentioned the case of the civil servant who passed away. His partner was refused the widow's portion of his civil servant pension as they were not married. This was also found to be unconstitutional. Contrast this with the current taxation system where partners are treated as strangers for capital acquisition tax purposes. This is wide open to a constitutional challenge to the current legislation. Obviously, I am aware that during the past week, the State secured a Supreme Court appeal against the judge's ruling that it breached the Constitution when it refused a spouse's pension to a man who had lived with his late partner. There are anomalies in the current taxation system. Where a partner makes a gift to his or her partner, this will give rise to both capital gains tax and a gift tax. If they were married, however, there would be no tax. The tax rate bands for married couples differ from those for partners living together. This needs to be urgently addressed, and it is a matter for the Minister for Finance, Deputy Harris, to do so. The current legislation must be amended as soon as possible. I referenced and made a couple of proposals in this regard. The current cap of €400,000 should be increased to €800,000 on the home and separated from any other inheritance. Equally, the €40,000 cap for a niece or nephew or brother or sister should be increased to €250,000. We should also be looking at the 33% tax on the value of assets exceeding the specific, relationship-based tax-free thresholds. Those thresholds should be significantly increased, as I have already stated.

I thank the Deputy. I listened carefully to the points he raised. I am aware that this is an area of concern for many people. Indeed, James Sexton, whom we mentioned earlier, has led a well-documented campaign, End Discrimination in Inheritance Tax. He will be presenting to our parliamentary party tomorrow evening on it, and he has been presenting in the audiovisual room at Leinster House as well. This issue has been raised by many people in this House. As I mentioned before, the Government increased the thresholds in the Finance Act 2024. These increases amount to an increase of approximately 19.4% on group A, while the thresholds for groups B and C increased by 23%. The Tánaiste met with the End Discrimination in Inheritance Tax group, which, as I have said, is an advocacy group in relation to this matter. He told me the meeting was a productive conversation and he understands the concerns raised along with the burden of capital taxation. He is committed to having ongoing engagement with this group. The tax strategy group paper is looking at CAT this year across a number of areas, including thresholds levels. That paper is expected to be published in late June or early July. It will provide assistance to the Tánaiste and the wider Government as they prepare for whatever budgetary decisions will be taken later this year. It is worth noting that any increase or widening of the CAT thresholds will have costs and will be part of the annual budgetary considerations and process. Obviously, it will be competing with other budgetary demands. This is a matter that has been raised by the Taoiseach and Tánaiste, as well as by Deputy Cahill this evening. Indeed, I have heard both members of the Opposition and Government raise this matter on a number of occasions. It is about striking the right balance and taking into account how far we can afford to go in any particular year, while acknowledging the perceived inequities that are there currently.