2026-02-10

166. Deputy Catherine Callaghan asked the Tánaiste and Minister for Finance if he will amend inheritance tax thresholds for individuals who have no children of their own and would like to leave an inheritance to a niece or nephew; and if he will make a statement on the matter. [9956/26]

Will the Tánaiste consider amending the inheritance tax thresholds for individuals who have no children and would like to leave an inheritance to a niece or nephew?

I am aware of the group that is doing very good advocacy work on this issue. I look forward to meeting and engaging with it shortly. Capital acquisitions tax, CAT, applies to both gifts and inheritances and is charged at a rate of 33%. For CAT purposes, the relationship between the person giving a gift or inheritance and the person who receives it determines the maximum amount, known as the group threshold, below which CAT does not arise. The group thresholds were most recently increased in budget 2025. The group A threshold, which in general applies where the beneficiary is a child of the disponer, increased to €400,000 from €335,000. The group B threshold increased to €40,000 from €32,500. This threshold applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or lineal descendant of the disponer. The group C threshold increased to €20,000 from €16,250, with this threshold applying in all other cases. These increases amounted to an increase of 19.4% for group A, while the groups B and C thresholds increased by 23%. My officials examined CAT as part of last year's annual tax strategy group exercise. The resultant papers outlined the tax policy considerations for the Government and the options available to it in forming last year's budget. Published in advance of the budget, they are 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 - that is a matter for the Government and this House - and the papers produced by my Department are simply a list of options and issues to be considered in the budgetary process. What the group did very well was examine a number of cost modelling exercises, including proposals to amend the group B threshold parameters, as the Deputy and many others have raised in the House. There is a significant cost associated with further changes to the group thresholds. That is not necessarily a reason to make or not make them but it is something we must factor into our considerations. I recognise the burden of capital taxation and will continue to review these matters alongside my officials. We will consider any further changes in the context of the next budget.

I thank the Tánaiste for his answer. We know - and the Tánaiste knows better than anyone - that over the last number of years Fine Gael has been at the forefront of a changing Ireland where alternative family structures are welcomed and where people do not feel the pressure to confirm to what was once the traditional idea of a family. Fine Gael values personal liberty and it is clearly reflected in the broad liberalisation of Irish attitudes. However, while societal attitudes can naturally evolve over time, laws do not evolve of their own accord. They need political will to bring them up to date. I believe the current inheritance tax is reflective of a different Ireland from the Ireland we live in today. The most recent census data show there are almost 400,000 families without children in Ireland. Therefore, if an individual wishes to leave an inheritance to someone outside their immediate family, as has been mentioned, they are only tax exempt to the first €40,000 of that inheritance while couples in group A benefit from an exemption of ten times that much. With that in mind, how does the Tánaiste intend to work towards bringing our tax system in line with social attitudes and support new family structures by increasing the inheritance tax thresholds for childless individuals?

I am, as Deputy Callaghan will know, very aware of the burden that capital taxation places on people, and it is our party's position as well. Whether it is families or farmers, the burden of capital taxation is real. That is why in budget 2025 we as a Government took a decision to increase the thresholds. We increased threshold A, B and C. I certainly do not rule out over the lifetime of this Government further moves in this area. In fact, I commit to keeping these issues under review. That is the first point I would make. Second, I take the Deputy's point very much about the changing face of Ireland, diversity and composition of families. That is all absolutely true. I will be truthful that any significant changes in what we call threshold B does come at a significant cost. It is again not a reason why we do or do not do these things; it is just something we all need to consider in the context of the budget. Third, we should continue to look at what other countries are doing in this area and international comparisons because I am sure other countries are grappling with this issue. Finally, I take the point that there can sometimes be relatives who also have a caring role, perhaps a nephew or a niece who has been caring. That is something I hear a lot. I do not mean that they are just a nephew or a niece because that is a very important familial relationship but in addition to that they may have been in a long-term caring role too. There are a number of issues to unpack here. That is why I want to meet the advocacy groups and ask the tax strategy group to continue to consider all of these issues in advance of the budget.

I thank the Tánaiste. I like that response and that well-thought-out way of looking at it from the carer's point of view. I am heartened to hear that tax measures as a whole will be reviewed in the course of this Government. I point out, perhaps again, that for many people across Ireland, factors other than choice determine whether or not they have children. If these people own properties and should they wish to pass them on to their close relatives, the low exemption thresholds mean they will be burdening those relatives with large tax bills. Oftentimes, what happens then, as we all know, a family home that people would like to keep in the family needs to be sold. That is against the wishes of the person who has left it and those of the person who is inheriting it. Furthermore, as the Tánaiste is aware, these thresholds last throughout a person's lifetime. This means that if an uncle gives a gift of over €3,000 to their niece or nephew during their lifetime, it is deducted once again from the recipient's inheritance tax threshold at the end of life. With this in mind, would it be possible to amend the rules so that there is a greater exemption for gifts that are given during a person's life?

I absolutely concur with everything Deputy Callaghan has said. She rightly mentioned that families come in many shapes and forms and different sizes. I am very conscious that we link everything to our blood relatives. The time has come that when we are reviewing all the categories we have to consider those members of our families - because essentially, they can be very much considered as family - and perhaps consider a nominated heir rather than a straightforward A, B, C category and trying to slot them into a particular blood tie or familial relationship. While we are considering those, we consider those who care for us, family friends or whoever it is, and allow the person who has worked so hard to accumulate their house and assets during their lifetime to decide who should be the correct person to inherit those assets and properties.

I have pressed the Tánaiste on this before, as I have done his predecessor. I reiterate the fact that asset values are rising and have been steadily rising over many years. This applies particularly to the family home. At the same time, families are smaller and, as my colleagues are saying, it is not always a direct inheritance from a parent to child. Sometimes, it goes elsewhere in the family or even outside the family. In light of the fact that prices and incomes are rising, I stress that there is absolutely no inflationary-based response in the thresholds. I seek the Tánaiste's commitment that he will address this and look to reform the inheritance tax categories in budget 2027.

Gabhaim buíochas le Deputies Butterly, Brennan and Callaghan. It is really good that we tease through and discuss this issue. We have various views on this and different parties have different commitments in their manifestos in relation to this. We have a programme for Government now. We need to work our way through all of this. I have to be honest with the House. Every year over the next four budgets there will be a pot and resource, subject to the economy continuing to be run well, that will be available for tax decisions, and there will be competing demands and views as to what best to do. There is personal income tax, capital tax and a whole variety of different issues. We will tease our way through that. However, over the course of those four budgets, we can achieve quite a lot together too. That is why I am committing to keeping capital taxation and the burden of capital taxation under review. To help the conversation perhaps, I will put some figures on the record. If we were to increase, for example, the group A thresholds to €500,000 from the existing €400,000, the cost of that is €86.6 million. If we were to bring everyone on threshold B into threshold A, in other words, up to €400,000, the cost of that is around €305 million. These are all budget ready reckoners as opposed to my views. Of course, there are costs associated with all of these but I take that point about families changing, care changing and the empowerment of individuals, and I will give further consideration to this in the time ahead.