Those with assets left disappointed after Donohoe reneges on inheritance tax promises

THE Government reneged on its promise to alter the inheritance tax regime in the Budget. It had promised to increase the tax-free thresholds that apply before the tax is applied.

But Finance Minister Paschal Donohoe did not make any changes to the thresholds in Budget 2018.

Donohoe said he did not have the money this year to raise the thresholds and instead promised to return to the issue in next year’s Budget.

“I didn’t have the money available to do it this year. I had to make a choice regarding what I could do,” Donohoe said after the Budget. “I would hope to be in a position when I get to next year’s Budget to do something on it.”

The minister did not disagree with a suggestion that the inheritance tax changes will not feature in the Finance Bill, which gives effect to many Budget measures.

The Fine Gael election manifesto and the Programme for Government, and former Finance Minister Michael Noonan had all promised to raise the tax-free threshold to allow children to receive up to €500,000 from their parents without paying tax.

Last year’s budget raised this threshold to €310,000.

The tax is levied at a rate of 33pc for amounts over the tax-free thresholds. The formal name for the tax is Capital Acquisitions Tax (CAT).

But Donohoe decided to make no changes to any of the tax-free threshold categories. The threshold that applies when parents are leaving property and other assets to children, known as group A, stays at €310,000.

There had been strong calls for an increase in the threshold that applies when a gift is made to a brother, sister, nieces and nephews and grandchildren. This is known as group B.

Linear relatives can receive €32,500 before they have to pay inheritance tax.

And those called “strangers in blood”, or people who are not related, can receive €16,250 before paying the tax. This is known as group C.

Solicitor Susan Murphy of MakeMyWill. ie said it was surprising that there was no mention of any increases in the CAT inheritance/gift tax-free thresholds.

This, despite assurances last year that the Government was striving to bring the Group A threshold up to €500,000 over the next few years, she said.

It was hoped the thresholds would increase again this year, to bring them closer to those that applied before the financial crash.

Obviously, Donohoe could not deliver on all the promises made. But why make a commitment and then drop it?