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 value, debts and funeral costs, gifts made in the last seven years, and the Group threshold that applies to your heirs. It gives a headline CAT figure from those four inputs; it does not model asset-specific reliefs, so treat Business Relief and agricultural relief separately with an adviser. Most families with €500k+ estates can save €20k–€100k in CAT through proper planning.