Government backbenchers from both Fianna Fáil and Fine Gael are pressing for significant reforms to Ireland’s inheritance tax system in the upcoming budget, with particular focus on improving provisions for people without children.
The issue has gained momentum after the Tax Strategy Group noted that people unrelated by blood could have “equally close and meaningful relationships similar to familial relationships.” The expert panel suggested ‘chosen relationship’ legislation could allow childless individuals to select one or two heirs under the same favorable tax grouping as parent-child relationships.
Fianna Fáil TD John Lahart, who personally faces this situation, expressed strong support for reform: “I would be hugely sympathetic because I’m actually in that situation myself. To me, it’s an anomaly.”
Lahart highlighted how current rules force people to sell inherited properties due to tax burdens, noting that “a lot of people in this situation just don’t want to see their lifetime savings or investments swallowed up by the taxman.”
Both coalition parties made inheritance tax pledges in their election manifestos. Fianna Fáil committed to reviewing thresholds for those without children and adjusting Categories A, B, and C thresholds to reflect property price increases. Fine Gael promised to raise the Group A threshold for children to €500,000, Group B for siblings to €75,000, and Group C for others to €50,000.
Tánaiste Simon Harris has previously acknowledged that inheritance tax changes “deserve to be considered,” citing “unfairnesses” and “anomalies” in the current system.
Meanwhile, Fianna Fáil TD Cormac Devlin is calling for the Small Gift Exemption to increase from €3,000 to €5,000 annually. The threshold hasn’t been revised despite rising living costs, and Devlin argues the change would help families transfer modest wealth without tax penalties.
“A young person could receive €5,000 from each parent – €10,000 in total, without affecting their lifetime tax-free thresholds,” Devlin explained, noting this could significantly help with college fees or house deposits.
Any inheritance tax changes would draw from the €1.5 billion tax package earmarked for October’s budget, though Finance Minister Paschal Donohoe has warned of significant costs associated with substantial CAT reforms.