More than half of inheritance tax paid by people with lowest tax-free thresholds
Grant Thornton recommends introduction of a nominated beneficiary allowance
14th September 2026: More than half of Capital Acquisitions Tax (CAT) collected in Ireland last year came from beneficiaries entitled to the lowest tax-free thresholds, according to Revenue figures*. In 2025, beneficiaries in Groups B and C generated almost €570 million of inheritance tax receipts, compared with €399 million from beneficiaries in Group A, meaning that almost 59% of all inheritance tax collected came from recipients outside the parent-child threshold category. Revenue collected €1.12 billion in net Capital Acquisitions Tax (CAT) receipts during 2025, equivalent to approximately 1% of total net Exchequer tax receipts.
Against that backdrop, Grant Thornton has argued that there is a strong case for Government to examine a targeted reform of the current regime, particularly where beneficiaries subject to the lowest tax-free thresholds are accounting for a disproportionate share of the tax collected. This is particularly relevant as rising residential property values are increasingly exposing people outside the traditional parent-to-child relationship to significant tax liabilities.
Grant Thornton has recommended the introduction of a nominated beneficiary allowance, which could serve as a targeted relief designed to recognise modern family and support relationships while preserving the existing preference for transfers between parents and children. The allowance would not require a fundamental redesign of Ireland’s inheritance tax system and limiting the relief to a single nominee would help preserve the integrity of the existing system.
The objective would not be to place every beneficiary on the same footing as a child. Rather, it would provide limited recognition for one significant relationship where the traditional parent-child model does not reflect reality. If introduced, an individual could formally nominate one person during their lifetime. That nominee could qualify for a dedicated CAT threshold set between the current Group A and Group B thresholds or access to part of the existing Group A threshold.
Under the current CAT regime, a child can receive gifts and inheritances from their parents up to a lifetime threshold of €400,000 before CAT becomes payable. However, the Group B threshold, which generally applies to inheritances and gifts received by siblings, nieces, nephews, grandchildren and grandparents, is €40,000. The Group C threshold, which applies to other beneficiaries including friends and unmarried partners, is €20,000. Amounts above the relevant lifetime threshold are generally subject to CAT at 33%.
The fact that 59% of CAT collected in 2025 came from people within Groups B and C highlights an imbalance within the current system and raises questions over whether inheritance tax rules adequately reflect the circumstances of modern Irish families. As a result, Grant Thornton is reiterating its call on Government to use Budget 2027 to undertake a broader review of CAT thresholds, including extending access to the Category A threshold beyond the traditional parent-child relationship to encompass a wider range of family members and cohabitants, while also supporting business succession planning.
Julia Considine, Private Client Partner, Grant Thornton said:
“The Revenue figures bring the disparity within Ireland’s inheritance tax system into sharp focus. More than half of the CAT collected last year came from beneficiaries whose tax-free threshold was €40,000 or less. That is significant and demonstrates why we believe the current framework should be reformed.
The issue has become more striking as residential property values have increased. Someone can inherit what may be a relatively ordinary family home but, depending on their relationship to the person leaving that behind in their will, only a small fraction of its value may fall within their tax-free threshold.
The tax treatment of an inheritance can vary enormously depending on whether the beneficiary is a child, sibling, niece, nephew or long-term partner. Yet family circumstances in Ireland have changed dramatically in recent years and the tax system needs to better recognise that reality.
This is particularly relevant for people who do not have children and may naturally wish to leave their home or other assets to a sibling, niece, nephew or long-term partner. The current system can place those beneficiaries at a considerable disadvantage simply because their family circumstances do not fit within the traditional parent-to-child model that the most generous CAT threshold is based on.”
The latest Revenue Annual Report shows that net CAT receipts increased from €854 million in 2024 to €1.12 billion in 2025, an increase of approximately €266 million. CAT accounted for just over 1% of the €106.5 billion in total net Exchequer receipts collected during the year.
Grant Thornton said the increase in receipts should be considered in the context of Ireland’s property market and the impact that increasing residential property values can have on inheritance tax liabilities. The firm argues that without appropriate reform, more families risk being brought within the scope of CAT or face larger liabilities because of increases in the value of inherited property. Considine added:
“Any changes to taxation would obviously have an Exchequer impact and need to be considered within the wider fiscal environment. The starting point though should be whether the system is fair. When more than half of the tax collected is coming from beneficiaries entitled to thresholds of €40,000 or less, there is a strong argument that the current framework should be reformed.
It doesn’t simply come down to raising thresholds. There is an opportunity to examine whether the categories themselves are relevant for Irish society today. Family structures and living arrangements have changed, while residential property values have increased substantially. The CAT regime should evolve with them.
Budget 2027 provides Government with an opportunity to begin addressing that imbalance and move towards an inheritance tax system that more accurately reflects modern family relationships and the economic realities facing people inheriting property today.”
ENDS
Breakdown of capital acquisitions tax receipts [PDF]