A Brief History of Inheritance Tax in Ireland
A Brief History of Inheritance Tax in Ireland
When most people hear “inheritance tax,” they think of a modern revenue grab. But the truth is, Ireland’s inheritance tax — officially called Capital Acquisitions Tax (CAT) — has deep roots stretching back well over a century.
From Estate Duty to Inheritance Tax
Before 1976, Ireland operated under a British-era system known as Estate Duty. This was a tax on the estate of the deceased before it was distributed, rather than on what each person received. Estate Duty was introduced in 1894, and it remained in force long after independence.
By the 1970s, however, it had become clear that the system was outdated. It was cumbersome, confusing, and out of step with modern tax principles.
1976: The Birth of Capital Acquisitions Tax
In 1976, the government introduced a brand-new approach: Capital Acquisitions Tax (CAT), which covered both inheritances and gifts. This was a major shift — for the first time, the beneficiary, not the estate, became liable for the tax.
The new system also introduced group thresholds, depending on the relationship between the giver and the recipient:
Group A: Children (and other direct descendants)
Group B: Siblings, nieces, nephews, grandparents
Group C: All others
The structure was fairer and simpler — but it also brought Ireland in line with European practice.
1990s: Reliefs for Farms and Family Businesses
By the early 1990s, there were growing concerns that CAT was forcing families to sell farms or small businesses just to pay the tax bill. In response, two major reliefs were introduced:
Agricultural Relief (1994): Up to 90% reduction on qualifying farmland.
Business Relief (1994): Up to 90% reduction on qualifying business assets.
These reliefs remain cornerstones of Irish inheritance-tax planning today.
2003: A New Framework
In 2003, the Capital Acquisitions Tax Consolidation Act streamlined all prior legislation into one modern framework. It remains the backbone of CAT law today — and it’s under this Act that Section 72 policies were created, allowing tax-free life-insurance proceeds to be used to pay inheritance tax.
The Boom, the Bust, and the Recovery
During the Celtic Tiger years, rates fell as low as 20%, and thresholds were generous — in 2009, a child could inherit over €540,000 tax-free.
After the 2008 crash, however, the tide turned:
Rates rose to 33%, where they remain today.
Thresholds fell dramatically (as low as €225,000 for Group A).
Since 2016, successive budgets have gradually increased thresholds again — today, the Group A limit stands at €400,000, with calls for further increases to reflect rising property values.
2020s: Stability and Estate-Planning Awareness
In recent years, the rules have settled. The rate remains 33%, thresholds stable, and the Section 72 policy has become one of the most effective ways for families to ring-fence funds to cover a future inheritance-tax bill — ensuring your children and / or other beneficiaries can inherit assets intact, without a forced sale.
Timeline at a Glance
| Year | Event |
|---|---|
| 1894 | British Estate Duty introduced |
| 1922 | Estate Duty continues post-independence |
| 1976 | Capital Acquisitions Tax Act replaces Estate Duty |
| 1994 | Agricultural & Business Relief introduced |
| 2003 | CAT Consolidation Act — foundation for Section 72 relief |
| 2009–2012 | Post-crash tightening: rates up, thresholds down |
| 2016–2021 | Gradual easing; Group A threshold reaches €400k |
| 2025 | No Budget 2026 change to inheritance-tax rules |
In Summary
Inheritance tax in Ireland has evolved from a blunt estate-duty tool into a more balanced system — one that taxes wealth transfers but recognises the need to protect family assets.
For those planning ahead, tools like Section 72 life-insurance policies offer a simple, compliant, and efficient way to ensure the next generation receives what was intended — not what’s left after tax.
Next Step
If you’d like to explore how a Section 72 policy could protect your family from a future tax bill, request a free personalised quote or speak directly with a qualified adviser.
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