Tax-free threshold for gifts and inheritances increased
THE tax on inheritances in this country is regarded as one of the toughest in the western world.
But there was a change in the recent Budget, which means children can inherit more without paying tax.
The tax-free threshold for asset transfers from a parent to a child has gone up from €225,000 to €280,000.
The increase applies in respect of gifts or inheritances received on Thursday, October 15 last.
There was no change in the tax rate, which stays at 33pc for the tax which is officially called capital acquisitions tax (CAT).
Our inheritance tax regime was the subject of concern for the last year, as rising property prices have meant that thousands of ordinary families have been hit unexpectedly with huge inheritance tax bills, as rising property prices push them over exemption limits.
Solicitor Susan Murphy, of MakeMyWill Solicitors, outlines some of what you need to know about inheritance tax.
A lot of people are unsure about whether they have to pay tax on a gift or inheritance they received.
If you received a gift of €3,000 or lower during the year from anyone, you are entitled to a small-gift exemption and there is no requirement to file a return. This exemption does not apply to inheritances received.
For gifts or inheritances over €3,000, you need to see which tax-free threshold category you fall into. These categories include:
◊ Group A: parent to child - the threshold is €225,000 (amended to €280,000 in Budget 2016)
◊ Group B: siblings, nieces, nephews, grandchildren - the threshold is €30,150
◊ Group C: strangers-in-blood - the threshold is €15,175.
If you received a gift or inheritance during the period September 1, 2014, and August 31, 2015, and the total aggregable value of gifts or inheritances received exceeds the group threshold applicable, you may be liable to pay capital acquisitions tax (commonly known as gift or inheritance tax) at a rate of 33pc.
The Revenue might already be aware that you have a tax liability and may have sent you a personalised IT38 Form (A Gift/Inheritance Tax Return Form).
Favourite niece/ nephew relief
If an uncle or aunt has given you their business, you may fall into the Group A category, where the tax free threshold is €225,000 (amended to €280,000 in Budget 2016) provided you have worked for him or her substantially on a full-time basis for the five years immediately preceding the gift or inheritance.
This relief only applies to assets used in connection with the business.