Jade O’Kane provides a tax update from the 2025 Irish Budget - Capital Acquisitions Tax and Agricultural Relief

Further to the Irish Budget 2025, with regard to inheritance tax, the centrepiece of the changes related to the increases in the tax-free thresholds, which are as follows:

Class A – is now €400,000 (previously €335,000)
Class B – is now €40,000 (previously €32,500)
Class C – is now €20,000 (previously €16,250)

You might have delayed some tax planning arrangements or will drafting, pending the outcome of the Budget. It is suggested that these changes are not really going to have that much of an effect. It should be noted that these changes came into effect from the 2nd of October 2024 and apply to deaths on or after that date.

Many people worry that the family home will be sold for Capital Acquisitions Tax reasons, given that the average house price nationally is now €409,000 and in Dublin €568,000. So, increasing the tax threshold does come some way in alleviating that concern; particularly if parents have more than one child and decide to leave the family home between their children.

A further change to note is that, to avail of Capital Acquisitions Tax agricultural relief, the disponer (the person who provided the gift or inheritance) must be farming the lands six years before the date of death. This amendment appears to target an abuse of agricultural relief by investors, as investors were acquiring agricultural land and then passing it down the generations with the benefit of agricultural relief.

It will be interesting to see how issues – such as elderly farmers – are dealt with (some of whom may be in a nursing home prior to death or otherwise incapable of farming prior to death). It is noted that the disponee can avail of the relief where the disponer farmer has leased the land.