FG hoping to ‘leave legacy for our Sinn Féin friends’ by doubling threshold for inheritance tax to €700k
Radical plan would all but do away with ‘home and hearth’ levy but risks worsening Coalition tensions
FINE Gael wants to radically reform inheritance tax by doubling the thresholds to just under €700,000 in a move that would free the majority of people from paying the ‘home and hearth’ levy.
The move would be very popular with Fine Gael’s base but risks sparking further tensions with its Fianna Fáil Coalition partners five months out from the budget.
Over the past month, the two parties have been trying to outdo each other with a series of public promises to woo voters ahead of the Coalition’s final budget before the next general election.
Fine Gael has vowed to bring in significant tax reforms to ease the pressure on the so-called ‘squeezed middle’.
Meanwhile, Fianna Fáil has promised €1.25bn worth of packages, including major increases in pensions and child benefit, and €900m worth of personal tax cuts.
Now Fine Gael has fuelled further tension among the Government parties by publicly calling for sweeping changes to Capital Acquisitions Tax (CAT), including inheritance tax, which took in €605m in 2023.
Fine Gael TD Colm Brophy said significant reform of what he described as a ‘penal tax on home and hearth’ is now ‘a taxation priority’. The Dublin South-West TD told the Irish Mail on Sunday: ‘This is a regressive tax, and we will be seeking a doubling of inheritance thresholds.’
Currently, the thresholds are €335,000 for an inheriting child, stepchild, and certain foster children.
This drops steeply to €32,500 in cases where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant of the disponer.
In all other cases, the threshold is halved to €16,250.
Ordinarily, a nephew or niece is entitled to €32,500, but the higher threshold is applicable where the recipient meets specific conditions.
However, Mr Brophy said the ‘current system is not fit for purpose’, adding it would be ‘very difficult to buy a house for €335,000 over huge swathes of Dublin and increasingly across the country’.
He told the MoS: This is particularly unfair when it comes to Dublin, Cork, Limerick, and Galway. We should be allowing children to inherit the family home and not be paying tax.’
Under the Capital Acquisitions Tax Consolidation Act 2003, a beneficiary is mainly accountable for payment of inheritance/gift tax at 33% beyond set thresholds. The donor, or their estate, may also be liable for payment if a beneficiary cannot pay the tax.
The law effectively means people with children can make gifts and inheritances on far more advantageous tax terms than those without children.
‘This is a relic of austerity which no longer meets current housing requirements,’ Mr Brophy said.
‘It is also especially unfair to carers and women. Usually, it is a woman – they tend to be the ones at home to mind a parent. Then, when they [the parents] are deceased, they’re told you have to sell the home and get out to pay the Revenue.
‘This is an issue of social justice; this is a tax that is utterly unfair on women and carers,’ he added.
Mr Brophy pointed out that there is already a swathe of other taxes on property, including the ‘Local Property Tax, Stamp Duty charges and VAT’.
He added: ‘The thresholds today are lower than a decade ago, and the rates are higher. This is the definition of a penal tax.’
A series of papers compiled by the Tax Strategy Group confirms that, prior to a series of austerity budgets, the top threshold before the inheritance tax was applied was €414,899 in 2010. In 2009, the rate of tax payable above the threshold was 20%.
However, Fianna Fáil Finance Minister Michael McGrath was circumspect recently when asked by Independent TD Matt Shanahan if he had ‘any plans to further expand the inheritance thresholds in the next budget, particularly where it relates to the estates of single individuals’. In response, Mr McGrath sidestepped the question, saying only: ‘It is important to bear in mind that CAT is not payable by the individual providing the benefit. It is a doneebased [person who receives a gift] tax that is payable by the recipient of a benefit, based on the taxable value of the benefit they receive.’
Now the parties are set for a showdown over the controversial tax, with one senior Fine Gael source warning: ‘We want change here and we will get it. Tax reform is one of our three key pillars.’
Referring to Tánaiste Micheál Martin’s promises of €1.25bn of packages at his party’s Ard Fheis last month, the source added: ‘Fianna Fáil started the budget process this year but we will finish it. Tax is our territory. We would like to leave a legacy for our Sinn Féin friends. If we double the threshold, let’s see this being unravelled by Sinn Féin.’
Mr McGrath did not respond to queries about the Fine Gael call to significantly increase the inheritance tax thresholds.
However, one senior Fianna Fáil senior source close to the heart of Government said: ‘This is another false promise, pie-in-the-sky, backof-the-envelope policy-making on the eve of local and European elections. Fine Gael have tried this before. They must think people have very short memories.
‘In January 2016, just before that year’s general election, Fine Gael made a big song and dance about how they were going to raise the inheritance tax threshold to €500,000. They ran the Department of Finance for the next seven budgets after that and simply didn’t deliver. They must have forgotten about it.’
‘It’s especially unfair on carers and women’
‘This is the definition of a penal tax’