Budget 2025: New Capital Acquisition Tax Threshold

The increase in the Capital Acquisitions Tax (CAT) threshold announced in Budget 2025 is the first significant increase to the threshold in nearly 5 years. Kate Russell, Solicitor in the Property and Probate Department discusses the recent changes to the CAT threshold and how it is a crucial factor to consider in proper Estate Planning.

What is Capital Acquisition Tax?

Capital Acquisitions Tax (CAT) is a tax payable on gifts and inheritances. It applies to gifts received from another person during their lifetime as well as assets received upon someone’s death.

Thresholds

The CAT threshold determines the amount of gift or inheritance that can be received tax-free. The amount of tax payable on the gift or bequest, depends on the relationship to the person bequeathing the gift or inheritance. This can have significant impact on the financial outcomes for beneficiaries of an Estate, who can be left with a substantial tax liability.

All gifts or bequests fall into the following 3 Categories:

1. Group A: Children (including adopted children, stepchildren, and certain foster children)
2. Group B: Siblings, nieces, nephews, grandchildren, and lineal ancestors or descendants other than those in Group A.
3. Group C: All other individuals not covered in Groups A or B.

Each Group has a threshold which is the amount that each person is entitled to receive tax-free. Budget 2025 has brought in significant changes to the threshold amount, increasing the amount that each person is entitled to receive before they are liable to pay CAT.

• Group A threshold is increasing from €335,000 to €400,000;
• Group B threshold is increasing from €32,500 to €40,000
• Group C threshold is increasing from €16,250 to €20,000.

Any amount received above these thresholds is subject to CAT at a rate of 33%.

Exemptions

There are several exemptions that can reduce the tax liability on gifts and inheritances. One such exemption is Spousal or Civil Partner  – Gifts or inheritance from a spouse or Civil Partner are fully exempt from tax.

Another is The Small Gifts Exemptions: This allows you to receive gifts up to the value of €3,000 from any one person in a calendar year

These exemptions can significantly impact the amount of CAT payable by a beneficiary of a gift or inheritance.

Conclusion

Estate planning is a highly personal process.  It is very much dependant on the individual circumstances and the will and preference of each person.  Understanding the CAT thresholds is an important part of this process to ensure that your assets are distributed according to your wishes. It is crucial to obtain proper tax and legal advice as proper estate planning may mitigate the future tax burden for your beneficiaries..

If you would like advice on Estate and Succession Planning, please contact our Probate Team.