Irish Inheritance Tax (CAT) 2026 — €335k Group A Threshold & 7-Year Planning

Irish inheritance tax (CAT—Capital Acquisitions Tax) is steep: 33% on amounts above thresholds. But the thresholds are generous (€335k for children), and strategic gifts within 7 years before death can save significant tax. This guide explains CAT rules and planning strategies.

CAT Basics

Capital Acquisitions Tax (CAT):

• Tax on inheritances and gifts received
• Applies when you inherit or receive a gift worth more than threshold
• Rate: 33% on excess above threshold
• Paid by recipient, not estate

Thresholds (2026):

• Group A (children from parent): €335,000
• Group B (siblings, grandchildren, etc.): €48,500
• Group C (unrelated): €16,250

Worked Example: Parent's €500,000 Estate

Scenario 1: No Planning (Inherit at Death)

Estate: €500,000 (property + savings) Recipient: Child

Calculation:

• Threshold (Group A): €335,000
• Taxable amount: €500,000 - €335,000 = €165,000
• CAT @ 33%: €54,450
• Net to child: €445,550

Scenario 2: With 7-Year Gifting Strategy

Parent gifts €165,000 to child within 7 years before death (via life insurance, lump sum, etc.)

Gift tax:

• €165,000 gift
• Threshold used: €0 (child received gift, not inheritance yet)
• CAT on gift @ 33%: €54,450
• Net received: €110,550

Later, parent dies with €335,000 remaining:

• Inheritance: €335,000
• Threshold: €335,000 (fully covered, no tax)
• Net received: €335,000

Total to child (gift + inheritance): €445,550 (same as scenario 1)

Benefit: None directly, BUT timing of tax payment and cash flow can matter.

Scenario 3: Better Strategy—Intentional Undervaluation + Gifts

Property valued at €500k but worth €600k (family business, illiquid assets):

Parent gifts shares of business to child (step-wise) over 7 years:

• Year 1: Gift €50k in shares (valued at €50k, but worth €70k)
• Year 3: Gift €50k in shares
• Year 5: Gift €50k in shares
• Year 7: Gift €50k in shares
• Total gifted: €200,000 (cost basis)

At death, estate now contains:

• Remaining shares: €400,000
• Cash: €0
• Inheritance: €400,000

Child's CAT position:

• Group A threshold: €335,000
• Taxable inheritance: €65,000
• CAT: €21,450
• Net: €378,550

Plus gifts received (no CAT on timing, spread over 7 years):

• €200,000 received
• Total to child: €578,550 (vs. €445,550 with no planning)

Tax saved: €133,000 (through gradual transfer, business valuation strategies)

7-Year Rule: The Planning Window

Key rule: Gifts made more than 7 years before death are outside the CAT net.

Implications:

• If you gift €100k now (age 50), you die at 78 (28 years later): Gift is outside CAT
• If you gift €100k now (age 75), you die at 80 (5 years later): Gift is inside CAT (counts toward threshold)

7-Year rule applies to:

• Inter-vivos gifts (lifetime gifts)
• Life insurance proceeds (if you own the policy in your name)
• Gifts via deed of gift

Does NOT apply to:

• Assets you still own at death (subject to full estate CAT)
• Gifts made within 7 years of death (included in recipient's threshold calculation)

Strategic Gifting Plan: Parent with €600k Estate, Child as Primary Heir

Goal: Minimize CAT burden on child

Timeline:

Year 1–3 (Today):

• Gift €100,000 to child (property transfer, life insurance assignment, or cash)
• Spouse also gifts €100,000 (use both thresholds if married)
• Total gifted: €200,000

Year 4–6:

• Gift another €100,000 (further property partition)
• Spouse gifts €100,000
• Total new gifts: €200,000; cumulative €400,000

Year 7:

• Final gift: €50,000 (if not yet using spouse's threshold)
• Total gifted: €450,000+

At death (after 7 years from first gift):

• Remaining estate: €600,000 - €450,000 = €150,000
• CAT on inheritance: €0 (€150k < €335k threshold)
• Total to child: €450,000 (gifts) + €150,000 (inheritance) = €600,000
• Tax paid: €0

vs. No planning:

• Child receives €600,000 estate
• CAT: 33% × (€600k - €335k) = €87,450
• Net: €512,550
• Tax savings via 7-year gifting: €87,450

Spousal Threshold

Married couple:

• Each spouse has independent CAT threshold (€335k for child, etc.)
• If husband gifts €335k to child, wife can independently gift €335k
• Combined: €670k can pass tax-free to child

Example:

• Husband gifts €300k to adult child (year 1)
• Wife gifts €300k to same child (year 2)
• Total: €600k outside CAT (both under their individual €335k threshold)
• At death, remaining estate passes with combined thresholds
• Child could receive €670k total before CAT applies

Life Insurance Strategy

Life insurance as gifting vehicle:

• Parent owns €500k life insurance policy
• Parent assigns policy to child (or transfers ownership via deed)
• Proceeds pass to child outside parent's estate, free of probate and CAT (if more than 7 years before death)
• Child receives €500k tax-free

Caveat: If parent assigns policy within 7 years of death, it counts toward CAT threshold.

Best practice: Assign policy early (age 50–55) to ensure 7-year clarity.

Business Property Relief (BPR)

If you own a family business:

• Business property relief: 90% of value (can be inherited tax-nearly-free)
• Applies to active business, not investment property
• Example: Business worth €500k, relief 90% = only €50k taxable
• Child inherits €500k business, CAT on €50k only = €16,500 tax

Requirement: Business must have been owned 5+ years before death.

Farmland Relief

Agricultural relief: Similar to BPR, 90% relief on farming land

Applies if:

• You own farmland
• Heir is engaged in farming
• Land owned 5+ years before death

Example: Farm worth €400k

• Taxable amount: 10% × €400k = €40k
• CAT @ 33%: €13,200
• Child inherits €400k farm, pays only €13,200 tax

Common Mistakes

1. Not using spouse's threshold: Leaving all to surviving spouse, then to child, wastes first spouse's threshold.

   • Fix: Will spouse €335k, child €335k (use both thresholds)

2. Dying within 7 years of gifts: Thinking gifts are "safe" when still within 7 years of death.

   • Fix: Record gift dates; plan gifts early (10+ years before likely death)

3. Not documenting gifts: Verbal gifts or cash transfers are hard to prove for CAT purposes.

   • Fix: Use formal deed of gift, traceable transfers, or life insurance assignments

4. Ignoring life insurance ownership: Keep policy in your name (assigned to heir) for proper tax treatment.

   • Fix: Consult solicitor on assignment vs. new policy owned by heir

Comparison Table: Estate Plans

| Scenario | Estate | No Planning | With 7-Yr Gift | With BPR (Business) | Tax Saved | |---|---|---|---|---| | Simple €600k estate | €600k | €87,450 CAT | €0 (all gifted) | N/A | €87,450 | | Business + real estate | €500k | €54,450 CAT | €0 (gifted) | €13,200 (BPR) | €41,250 | | Farm to farmer-child | €400k | €21,450 CAT | €0 (gifted) | €13,200 (90% relief) | €8,250 |

Bottom Line

• CAT rate: 33% on inheritance above threshold
• Group A threshold (parent to child): €335,000 (generous)
• 7-year rule: Gifts >7 years before death are outside CAT; use this window to transfer wealth
• Spousal gift: Each spouse has separate threshold (€670k combined to child)
• Business/farm relief: 90% relief available, huge tax savings
• Life insurance: Assign early (>7 years before death) to remove from estate

Action: If you have €335k+ net worth and child heirs, consult an estate planning solicitor about:

• Formal gifting strategy (€100k+ per year, if possible)
• Business property relief eligibility
• Will structure (use both spousal thresholds)
• Life insurance assignments

Next step: Use the Inheritance Tax Estimate calculator with your estimated estate, heirs, and asset types (business, farmland, property). Model scenarios: no planning vs. 7-year gifting strategy vs. BPR relief. Most families with €500k+ estates can save €20k–€100k in CAT through proper planning.