Inheritance tax in Ireland, also known as Capital Acquisitions Tax (CAT), has become a hot topic in recent times. The recent increase in inheritance tax thresholds was a notable development in Budget 2025, following five years without any significant changes. The inheritance tax threshold now offers a more generous limit, but the debate on whether it’s enough continues. This article will explore where the main Irish political parties, including former Minister Alan Shatter, stand on this issue, the arguments for and against inheritance tax, and what these policies mean for future taxpayers.
What is Inheritance Tax in Ireland?
Inheritance tax is a 33% tax applied to gifts and inheritances once they exceed a certain threshold. However, it only applies if the value of the inheritance reaches a certain amount, with the thresholds varying based on the relationship between the deceased and the beneficiary.
- Group A: Inheritances from parents to children (including stepchildren) are taxed if they exceed €400,000.
- Group B: Inheritances from relatives such as siblings or nieces/nephews are taxed if they exceed €40,000.
- Group C: Inheritances from other relationships are taxed if they exceed €20,000.
Recent changes have seen increases in these thresholds, but are they enough to reflect the rising property values and the financial pressures faced by many Irish families?
Where Do the Main Political Parties Stand on Inheritance Tax?
Inheritance tax is a divisive issue in Irish politics, with different parties proposing varying reforms or changes to the existing system. Here’s a look at where the main parties stand:
Fine Gael’s Stance on Inheritance Tax
Fine Gael has long recognised the need for inheritance tax reform. The party has acknowledged that while inheritance tax is an important revenue source, the tax burden has increased significantly over the last 15 years. According to Fine Gael, the rise in property values and fiscal drag has effectively reduced the thresholds in real terms.
In its manifesto, Fine Gael pledges to increase the Group A inheritance threshold to €500,000, Group B to €75,000, and Group C to €50,000. This would make the inheritance tax system more reflective of the current economic climate, especially with the increasing property values. This move is designed to reduce the tax burden on families inheriting homes and farms.
Fianna Fáil’s Position on Inheritance Tax
Fianna Fáil understands the financial strain that inheritance tax places on people who inherit homes or farms. The party has advocated for a reduction in the inheritance tax rate from the current 33% to 25%, particularly for family homes and farms.
Fianna Fáil has also called for an increase in the inheritance thresholds, although the party acknowledges that the thresholds are still lower than they were in 2008. The party has promised to review the thresholds and adjust them to reflect the increase in property prices. However, no specific figures or timelines have been provided for these adjustments.
Sinn Féin’s Take on Inheritance Tax
Sinn Féin has a more progressive approach to inheritance tax. They argue that inheritance tax is an important tool in tackling inequality and raising funds for public services. They believe that wealthy estates should contribute more to public services.
Sinn Féin has proposed reverting the inheritance tax thresholds to pre-Budget 2025 levels and increasing the rate from 33% to 36%, which they estimate would raise an additional €143 million annually. They believe family homes should be treated differently from other assets and should not be subject to the same tax rates. Sinn Féin’s stance is clear: they want to increase inheritance tax to fund public services and reduce wealth inequality.
Alan Shatter and the Inheritance Tax Reform Campaign
Former Fine Gael TD and Minister for Justice and Defence, Alan Shatter, is a vocal critic of inheritance tax. He argues that the tax is a form of “state-sponsored grave robbery” and believes it forces the sale of homes that could provide long-term security for bereaved families.
Shatter has been actively campaigning for the abolition of inheritance tax, describing it as a “jealousy or resentment tax”. He claims that inheritance tax has become a burden on families, particularly those inheriting homes. As the chair of the Inheritance Tax Reform Campaign, he is pushing for the complete abolition of the tax, pointing to the burden it places on families during already difficult times. Shatter’s stance is that the tax disproportionately impacts people who inherit modest-sized homes, particularly those in rural areas, and does not reflect the real value of properties.
The Green Party’s Position on Inheritance Tax
The Green Party has a nuanced stance on inheritance tax. They have said that they will prioritise changes to income tax rather than inheritance tax. They have, however, pointed to the issue of agricultural and business relief, arguing that it often benefits wealthier farmers and business owners disproportionately.
The Green Party proposes restricting agricultural and business relief for inheritance tax, targeting those with assets worth three times the average farm value. This would ensure that the relief is targeted at smaller farms and businesses rather than large enterprises. The party has not outlined specific changes to the inheritance thresholds, but their manifesto suggests that they would focus on income taxes for broader wealth redistribution.
Other Parties: Labour, Social Democrats, and More
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Labour Party: Labour has not made any specific proposals for inheritance tax changes, but they advocate for a wealth tax. They propose a 1% levy on assets over €2 million, excluding the family home, pensions, and businesses.
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Social Democrats: The Social Democrats do not favour any increase in inheritance tax thresholds, arguing that the tax only affects a minority of people. They believe that inheritance tax should be viewed as a means to ensure fairness in the distribution of wealth.
Conclusion: Where Does This Leave Irish Taxpayers?
The issue of inheritance tax in Ireland remains contentious, with each political party proposing different solutions. From Fine Gael’s promise of higher thresholds to Sinn Féin’s call for a tax hike, and Alan Shatter’s campaign for its abolition, the debate continues to evolve.
Ultimately, the inheritance tax reform issue is about balancing fairness and revenue generation. Families will be watching closely to see which party’s proposals gain traction in the lead-up to the next general election. The increased thresholds in Budget 2025 may offer temporary relief, but the question remains: is it enough to ease the burden on Irish taxpayers?
photo credit: Nathan Trust
