Fianna Fáil Finance spokesperson Michael McGrath has highlighted an urgent need to review the thresholds for capital acquisition tax which is paid on inheritances.
The level at which an individual has to pay Capital Acquisitions Tax on a gift or inheritance from a parent to a child has been reduced by 60% in recent years to €225,000.
Deputy McGrath stated, “Parents want to be able to pass on the benefit of their hard work to their children and grandchildren. Whether this is in the form of the family home or savings, it is very important to many parents that they are able to provide for the future financial security of their family. Recent increases in property values mean that many more families are now potentially drawn in to the inheritance tax net. In many areas, a modest family home could no longer be passed from parent to child without triggering a significant inheritance tax liability. This can often result in the forced sale of the property to pay the inheritance tax.
“There is an urgent need to review the current thresholds so that they more accurately reflect current house prices. In Budget 2012 Labour TDs were trumpeting changes to inheritance tax rules as part of a “wealth tax package worth half a billion euro.” The reality is that unless the thresholds are changed many people who are far from wealthy will end up having to sell a property they inherit in order to be able to meet their capital acquisitions bill.
“The inheritance threshold for a gift or inheritance between a parent and a child – which is of course a lifetime threshold – was reduced to €332,084 during the lifetime of the previous government but has since been reduced twice further and now stands at €225,000. The rate of Capital Acquisitions Tax now tax stands at 33%. In addition, the Finance Act 2012 abolished the indexation of tax free thresholds which had traditionally moved in line with the Consumer Price Index. This means that the value of the thresholds is being reduced in real terms with each passing year.
“Naturally, this is not an issue that many people spend much time thinking about but it can present a major financial problem later in life during succession planning or when an unexpected death occurs. There has been very little debate about this issue in recent times but I believe the Minister should review the thresholds in the forthcoming budget.”