2025-12-09

6. Deputy Shay Brennan asked the Tánaiste and Minister for Finance if he plans to change the rates of capital acquisitions tax or the thresholds at which the rates are paid; and if he will make a statement on the matter. [65024/25]

This is my first Dáil engagement with the Tánaiste in his position as Minister of Finance. I take this opportunity to wish him all the best in that role. I look forward to working with him in his capacity as Minister into the future. What, if any, plans does the Tánaiste have in place to examine either the rates of capital acquisition tax or the relief thresholds for gifting or inheriting?

I thank Deputy Brennan for his kind words. I look forward to working with him as well. Capital acquisitions tax, CAT, applies to both gifts and inheritance 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 perceives it determines the maximum amount, known as the group threshold, below which the CAT does not arise. The group thresholds were most recently increased in budget 2025. The group A threshold increased to €400,000 from €335,000. This threshold applies where the beneficiary is a child of the disponer. This includes adopted children, stepchildren and some foster children. Parents may also fall within this threshold where they take an inheritance from a child. The group B threshold was increased to €40,000 from €32,500 in budget 2025. This threshold applies where the beneficiary is a brother, sister, niece, nephew or lineal ancestor or lineal descendant of the disponer. Following recent changes made to CAT legislation, the group B threshold also now applies to persons who receive gifts and inheritance from the wider family of their foster parents, for example from their foster siblings, uncles, aunts and grandparents. The group C threshold increased to €20,000 from €16,250 in budget 2025. This threshold applies in all other cases. Along with tax free group thresholds, various reliefs and exemptions are available in relation to CAT, including agriculture and business relief. There is also the small gift exemption, favourite niece or nephew relief and the dwelling house exemption. In general, the availability of specific reliefs in respect of a particular tax head often require a higher rate in order to generate appropriate yields. From a tax policy perspective, it is important to maintain stability and certainty and to ensure that the rate and thresholds in the context of the range of reliefs available. In truth, there is a significant associated cost with reducing the rate of CAT or increasing the associated thresholds. I recognise the burden of capital taxation. Further changes to the CAT rate and thresholds must therefore be considered among the various demands within the overall budget package, as they have been in the past. We will keep this under review in forthcoming budgets.

Inflation has risen sharply in recent years. Nowhere is this more evident than in urban areas, particularly in Dublin. The median house price in the capital now stands well above the €400,000 group A CAT threshold, yet there has been no recent adjustment to this threshold to reflect this mismatch between asset value and tax policy. This discrepancy often results in a difficult outcome where an individual inheriting a family home from a parent suddenly faces a significant tax liability. This often forces people to either remortgage a property or liquidate it in order to discharge that debt. Has the Department conducted any detailed modelling on the cost to the Exchequer of increasing the group A threshold? Has any serious consideration been given to linking future thresholds dynamically to the official house price index for greater fairness?

I am conscious of the area of the country the Deputy represents and the area of the country that I represent. I am also conscious that property prices, inflation, capital tax, etc., can place a real burden on people, particularly in circumstances where they inherit, for example, family homes. These are real issues that come across our desks and into our lives as we interact with people we represent. We will continue to keep them under review. We have to keep them under review in the context of all of the other pressures and the various tax packages that we bring forward. In the final budget of the previous Government, in which the Deputy's party and mine were both involved, we made adjustments to the thresholds. We made those adjustments effective in the context of gifts and inheritance taken on or after 2 October 2024. We will continue to keep this under review in forthcoming budgets. Each year, we produce tax strategy papers. We have a tax strategy group. Perhaps, in light of some of the suggestions the Deputy has made, this is something I will ask our tax strategy group to consider in advance of future budgets.

Individuals who are childless, by choice or otherwise, now make up nearly one in five adults but are effectively penalised under the current capital acquisitions tax regime. Without children to access the larger group A threshold, they are relegated to the much lower group B limit of €40,000 applicable for siblings, nieces and nephews, or even just the €20,000 under group C for all other cases. This means a third of the substantial value of an inheritance, which is often a family home, is paid out in tax liability. The Minister will appreciate this creates a profound unfairness for the 18% of people who are childless when it comes to inheritance. Will the Minister commit to keeping those reliant on group B and group C thresholds under active consideration when devising any changes to inheritance tax policy in next year's budget?

I will, because without pre-empting any future budgets, the last time we did this in budget 2025 we decided to move each of the bands and that was appropriate. We need to look at this in the round. There are always competing demands on what you can do in relation to a tax package each year but we have only delivered one budget out of five. We have four more and if we continue to keep the economy in good stead, continue to run budget surpluses and continue to be able to set money aside in future funds I believe in the medium-term fiscal framework the Minister, Deputy Chambers, and I will bring to Government soon we will be able to see a regular-sized rhythm of tax packages in future and all these issues can be considered in the context of that. With some of the specific policy elements Deputy Brennan has referenced, it would be useful to have the tax strategy group look at this in advance of future budgets. I will continue to link with him on it.