Everyone's problem! The family home and Inheritance Tax
By John English at SMP Financial Ltd
No one is more familiar with executor’s sales than auctioneers, estate agents and valuers. For families selling assets, these properties are not just a story of past generations but also one of the future which must be facilitated through the administration of taxes in the present.
Inheritance tax is no longer solely an issue for those traditionally considered wealthy. Given the increase in property values in recent decades, inheritance tax is ever increasingly becoming a consideration for more and more families. Let's look at this in a little more detail.
Inheritance tax or Capital Acquisitions Tax (CAT for short), is charged on the person receiving a benefit. There are universal exemptions which are based on the relationship between the person giving and the person receiving the inheritance. These are known as Group Thresholds and are categorised into Group A, B and C as per the table below, with inheritances between Spouses being fully exempt.
|
Relationship |
Limit |
|
Spouse * |
Fully exempt |
|
Group A* - Child, minor child of a deceased child |
€400,000 |
|
Group B - Grandparent, grandchild, brother, sister, niece, nephew, parent |
€40,000 |
|
Group C - All other “strangers in blood” |
€20,000 |
*For the purpose of these relationships, Civil Partners are considered as a Spouse and a child of a Civil Partner is considered as a Child.
CAT is payable at a rate of 33%. The Group Thresholds were meaningfully increased in Budget 2024 which was both welcome and overdue; however, this still commonly leaves families within the charge of tax. This is of particular relevance to those living in our larger towns and cities.
Some families may benefit from availing of certain reliefs and exemptions. In respect of property, the most common is the Dwelling House Exemption which allows for a property meeting certain criteria to be exempt from the charge of CAT should the person receiving the benefit live at that property. There are restrictions in respect of how long the property is lived in upon receiving an inheritance. Likewise, there are certain generous reliefs available on farm and business assets however these are also subject to certain conditions.
By understanding CAT rules and through prudent financial planning, people can achieve improved outcomes and avoid common inheritance pitfalls that may ultimately cost them dearly.
SMP Financial www.smpfinancial.com provides expert financial planning advice. We have specialist knowledge in pensions, investment, financial and inheritance planning and work with a broad array of product providers and specialist experts particularly in the area of taxation. John English is a Partner at SMP Financial specialising in advising on personal financial planning. Opinions expressed in this article are those of John and SMP Financial and not of this publication or associated organisation. John can be contacted at john@smpfinancial.com or on (086) 8146553.
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