Inheritance/gift tax thresholds

R

Rainfall

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It might be obvious but I can't find an answer to this on the revenue website. If gifts of €382k were received up to 2021 when the threshold was €335k, and CAT was paid on the €47k over the threshold at the time. If now in 2025 when the threshold is raised to €400k, another gift is received, does that mean that up to €65k of any further gift is tax free until the threshold is changed again? Or would CAT have to to be paid on the full amount received if it went over €400k (i.e. a gift of more than 18k). Does the increased threshold apply even though a previous threshold was surpassed?
I hope this makes sense!
Thanks
 
You have €18K of your (now €400K) CAT group A exemption threshold left. Anything over that is taxable.
 
Sorry to jump in on this but just want to clarify as would be impacted by the same- are you essentially not being double taxed in this way? You have already paid tax on an element of the gift but are now having to pay tax on this again? Sorry if I’m missing something here. I would think the threshold u can avail of should be 65k (being the 400k current threshold minus the precious 335k threshold) as you had already paid tax on anything above 335k. This seems very penal.
 
newtoinvesting said:
I had to look this up recently as was in a similar position. See Example 4 here.
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Which tallies with what I said above.
ClubMan said:
You have €18K of your (now €400K) CAT group A exemption threshold left. Anything over that is taxable.
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misstealeaf said:
I would think the threshold u can avail of should be 65k (being the 400k current threshold minus the precious 335k threshold) as you had already paid tax on anything above 335k.
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No. See above.
 
misstealeaf said:
You have already paid tax on an element of the gift but are now having to pay tax on this again?
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Rainfall said:
Taxed twice
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I don't get this. Where does double CAT taxation arise here?
Example 4
In 2023, Annie receives an inheritance valued at €34,000 from her sister. The Group B threshold at the date of the inheritance is €32,500. Annie has not received any prior gifts or inheritances under the Group B threshold. Annie pays CAT as follows:
Calculation of Capital Acquisition Tax (CAT) due for Annie
Value of property€34,000
Value of prior benefits in Group BNil
Less Group B threshold€32,500
Taxable excess€1,500
Tax due @ 33%€495
On 1 March 2025, Annie receives an inheritance valued at €20,000 from her grandfather. The Group B threshold at the date of the inheritance is €40,000. Annie pays CAT as follows:
Calculation of Capital Acquisition Tax (CAT) due for Annie
Value of property€20,000
Value of prior benefits in Group B€34,000
Less Group B threshold€40,000
Taxable excess€14,000
Tax due @ 33%€4,620
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Total inherited is €54k. If you inherited it today with a threshold of €40k the cat bill would be €4,620. In this example the total cat bill paid was €5,115 as tax was paid in two instances. So obviously more tax as a result of getting two gifts or inheritances (where threshold moves) - larger impact the larger the inheritance.
 
misstealeaf said:
as tax was paid in two instances
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Yes, because they're were two different inheritances at different times when different exemption thresholds applied. What, in your view, was the exact sum that was taxed twice in the example above?
 
I guess it is more on missing out on an increased threshold where tax was already paid. Anyway no point debating it. Thanks for all the replies
 
ClubMan said:
I don't get this. Where does double CAT taxation arise here?
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On the first inheritance, the lifetime exemption at that timeof €32,500 is availed off. The excess of €1,500 is taxed.

Subsequently, the tax free threshold is increased by €7,500 to €40,000.

However, the individual does not get the benefit of the €7,500 increase on inheritance 2. They only get a further tax-free inheritance of €6,000. The fact that €1,500 of the first inheritance was taxed is completely ignored.

For me, this is fundamentally unfair, and possibly a misinterpretation, but I'd have to very carefully analyse the legislation to assess if Revenue could be wrong on that.

Edit: initially I misread and thought they were gifts. I think the €3,000 annual exemption is just for gifts, not inheritances.
 
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Villaines said:
For me, this is fundamentally unfair, and possibly a misinterpretation . . .
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It's not a misinterpretation. The legislation is very clear; the threshhold relates to the aggregate amount of inheritances previously received, not the aggregate amount of tax previously paid.

And I don't think it's paticularlarly unfair. It's generally the case for all taxes that the amount of tax you paid in previous years won't be relevant to calculating your liablity this year; why would CAT be an exception? Plus, if the system worked in the way you suggest, if threshholds are reduced (and this has happened in the past) people would face retrosepctive tax bills in respect of inheritances taxed at the time under the old, higher threshholds; would that be fair?
 
ClubMan said:
What amount do you think was subject to double tax?
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Not double tax as such, but the individual has not been able to avail of the entire €40,000 lifetime exemption. They have only been able to use €38,500, so they have been restricted from using the total exemption theshold in the legislation. €1,500 of the exemption is not available to them, which I consider unfair, as if somebody else now gets an inheritance of more than the latest threshold, they can use the full €40,000 (assuming that's still the latest number).
 
TomEdison said:
It's not a misinterpretation. The legislation is very clear; the threshhold relates to the aggregate amount of inheritances previously received, not the aggregate amount of tax previously paid.

And I don't think it's paticularlarly unfair. It's generally the case for all taxes that the amount of tax you paid in previous years won't be relevant to calculating your liablity this year; why would CAT be an exception? Plus, if the system worked in the way you suggest, if threshholds are reduced (and this has happened in the past) people would face retrosepctive tax bills in respect of inheritances taxed at the time under the old, higher threshholds; would that be fair?
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I haven't read it so I can't disagree, but yes I think it's unfair.

I also think it's unfair to ever reduce the threshold, I see no rationale for it given the inflation we have.

I'll spare you the rant I want to give on CAT.
 
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