Inheritances and gifts worth some €1.4 billion were subject to inheritance tax last year, as rising property prices and recovering household wealth saw assets subject to tax at 33 per cent jump by €144 million on the previous year.
According to latest figures from the Revenue Commissioners, receipts of capital acquisition tax (CAT), which is levied on both gifts and inheritances, rose to a record high of €460 million in 2017, up by 11 per cent on 2016.
Inheritance tax, which is paid on bequests in excess of tax free thresholds, accounted for the vast majority of this, at 93 per cent, followed by gift tax at 7 per cent, and discretionary trust tax at 0.4 per cent.
Trajectory
Given the upward trajectory in tax-free thresholds for category A, which refers to sums inherited by sons and daughters, the tax yield remained steady at €141 million for 2017, accounting for just 33 per cent of the overall yield.
It has, however, increased almost three-fold on 2011, when just €50 million in tax was collected from this cohort.
Children can now inherit €310,000 without incurring any inheritance taxes, having fallen as low as €250,000 in 2012. However, it is still some way behind the €542,000 level reached in 2009 and the Government has committed to “working towards” its reinstatement at about €500,000.
The biggest earner for the exchequer continues to be from those benefiting from a category B threshold, such as parents, brothers, sisters, nieces, nephews, grandparents and grandchildren.
With a tax-free threshold of just € 32,500, a significant inheritance attracts a considerable amount of tax. Last year, this figure reached a new high of €226 million, some 53 per cent of overall receipts.
Yield
The substantial scale of this tax yield, plus the fact that rising property prices will push more people into the CAT tax net, means the Government may have some lee-way to increase the parent-to-child threshold without hurting its tax take.
The final group, category C, are only entitled to inherit €16,250 tax free, and it is typically referred to as the “stranger” group, with the people inheriting not related to the person whose assets are being transferred. In 2017, this group paid CAT of €58 million, up by 5 per cent on 2016.
When it came to gift taxes, which came to €32 million last year, children receiving gifts of cash or assets from their parents were the biggest contributors, at €20 million, with those in category B paying gift tax of €7 million and “strangers” receiving gifts paying tax of €6 million in 2017, down from €9 million a year earlier.
