How Irish Inheritance Tax (CAT) Works — and Why Family Business Owners Must Plan for It

Capital Acquisitions Tax — CAT — is Ireland’s gift and inheritance tax. It applies when you receive a gift or inheritance above your lifetime tax-free threshold, and it is charged at 33% on the excess. Despite its somewhat dry official name, CAT is a tax that generates more emotional responses than almost any other in my practice — because it arises at the worst possible time, when families are dealing with bereavement, and because the amounts involved can be genuinely large.

The good news is that CAT, like CGT, is plannable. The reliefs available — particularly Business Relief and Agricultural Relief for business and farming families — can reduce or eliminate what would otherwise be a very significant tax bill. But those reliefs require planning well in advance. They cannot be applied retrospectively after a death has occurred.

How CAT Works: The Basic Mechanics

CAT is charged on the value of a gift or inheritance received above the recipient’s lifetime tax-free threshold. The threshold depends on the relationship between the giver (the disponer) and the recipient (the beneficiary).

Group A — applies to a gift or inheritance received from a parent. The Group A threshold in 2026 is €400,000. A child can receive up to €400,000 in total from their parents, across gifts and inheritances combined, over their lifetime, before CAT applies.

Group B — applies to gifts or inheritances received from a sibling, a grandparent, a niece or nephew, or a lineal ancestor or descendant other than a parent. The Group B threshold is €40,000.

Group C — applies to all other relationships — cousins, friends, unrelated individuals. The Group C threshold is €20,000.

These thresholds are lifetime thresholds. All gifts and inheritances received from the relevant group aggregate together over the recipient’s lifetime. A child who received a gift of €200,000 from a parent ten years ago and now inherits €300,000 from the same parent has used €500,000 against the €400,000 Group A threshold — CAT applies on €100,000 at 33%, generating a bill of €33,000.

The aggregation applies regardless of when in the recipient’s life the gifts and inheritances were received, going back to December 1991 (the date from which the current system applies).

The 33% Rate in Context

At 33%, Ireland’s CAT rate is among the higher rates in the OECD, though comparing internationally requires care because threshold levels, relationship categories, and available reliefs vary considerably between countries.

What makes CAT particularly significant in Ireland currently is the combination of a 33% rate and thresholds that have not kept pace with asset value growth — particularly property values. As I noted in my Budget 2026 analysis, Dundalk Chamber continues to lobby for meaningful threshold improvements. A Group A threshold of €400,000 sounds generous in isolation. But a family home in County Louth worth €400,000 — an entirely ordinary family home, not a mansion — already uses the full Group A threshold. Any other assets inherited alongside it — savings, a car, personal property, a share in a business — are fully taxable.

For families with more substantial assets — a family home plus a business, a farm, investment property, or significant savings — the potential CAT liability can be very large.

Gifts and Inheritances: The Same Tax

CAT applies to both gifts (received during the giver’s lifetime) and inheritances (received following a death). This is an important distinction from UK inheritance tax, which applies only on death.

The practical implication: giving money or property to family members during your lifetime does not avoid CAT. The gift is assessed against the same lifetime threshold as an inheritance would be, and CAT is charged on any excess above the threshold.

However, there is a small annual gift exemption: each individual can give up to €3,000 per year to any number of recipients, free of CAT. This is the “small gift exemption” and it accumulates meaningfully over time. A parent who gives €3,000 per year to each of four children over twenty years transfers €240,000 entirely free of CAT. The small gift exemption is not dramatic, but it is a legitimate and underused planning tool.

The Principal Private Residence Relief

Where a beneficiary inherits the family home, the dwelling house exemption may apply. Subject to conditions — including that the beneficiary was living in the property for a period before the inheritance and does not own another residential property — the inherited dwelling house can be exempt from CAT entirely.

This is a significant relief for families where the main inheritance is the family home. The conditions must be carefully assessed; they are not automatically satisfied.

Business Relief and Agricultural Relief: The Big Mitigants

For families with business or farming assets, Business Relief (Section 89 CATCA 2003) and Agricultural Relief provide a 90% reduction in the value of qualifying assets for CAT purposes.

I covered these reliefs in my article on family business succession planning, and the detail is there. The key point for this article is the interaction with overall estate planning.

A typical County Louth farming family might have:

A family home worth €350,000. A farm (land, buildings, machinery) worth €1.5 million. Savings and other assets of €200,000.

Without reliefs, the total estate is approximately €2.05 million. Against a €400,000 Group A threshold, the taxable excess is €1.65 million, generating a CAT bill of approximately €544,500.

With Agricultural Relief on the farm assets, the farm is valued at 10% of its market value for CAT purposes — €150,000 instead of €1.5 million. The revised estate value for CAT is approximately €700,000. Against the €400,000 threshold, the taxable excess is €300,000, generating a CAT bill of approximately €99,000. The saving from the relief is over €445,000.

This is not a theoretical saving. It is the difference between an estate that can be transferred intact to the next generation and one that requires the sale of the farm to pay the tax bill.

Planning Priorities

The planning priorities for families with significant assets are:

Assess the potential CAT liability on the current estate. This requires a realistic current market valuation of all assets — property, business interests, savings, investments.

Identify which assets qualify for Business Relief or Agricultural Relief, and ensure the qualifying conditions are being maintained. These reliefs have retention conditions — the beneficiary must hold the qualifying assets for six years after receiving them. Non-qualifying uses can result in loss of relief.

Use the annual small gift exemption systematically. €3,000 per person per year is not a solution to a large estate, but it contributes to reducing the taxable estate over time.

Consider life insurance written in trust. A life insurance policy written in trust — so that the proceeds fall outside the estate and are paid directly to the beneficiaries — can be used to fund the anticipated CAT liability. This converts a lump-sum tax bill at the time of death into manageable premium payments during the insured person’s lifetime.

Review the family home situation. Where multiple children are likely to inherit, and the family home is the primary asset, consideration should be given to who will qualify for the dwelling house exemption and whether the estate can be structured to maximise the benefit of that exemption.

None of this planning needs to be complex or expensive. It starts with an honest conversation about what you own, what it is worth, and what the tax implications of leaving it to your family are. That conversation is worth having sooner rather than later. For more on inheritance tax and other planning topics, browse our taxation guides.