Budget 2016 has increased the Capital Acquisitions Tax Group A tax free threshold from €225,000 to €280,000, an increase of 24%. The increase takes effect from the 14th October 2015 and applies to all gifts or inheritances in that group from that date. This increase will be welcomed by parents who intend to assist their children during their life or in their estate.
The Group A threshold applies to gifts or inheritances received by a son or daughter from their parent. In certain instances, the Group A threshold can be used by a grandchild where a child predeceases their parent leaving child or children. The Group A threshold has decreased significantly from the height of the boom. The Group A tax free threshold was once €542,544 albeit for a period of just over three months from the 1st January 2009 to the 7th April 2009. The government brought in a supplementary budget to deal with the financial crisis.
Capital Acquisitions Tax is paid at a rate of 33% above your tax free threshold. An example of how it works is as follows:
“John dies leaving €300,000 to his son, Paul. Assuming Paul has no prior aggregable gifts or inheritances within his Group A threshold, he will get €280,000 tax free and will pay tax at a rate of 33% on the balance €20,000. Paul will pay Capital Acquisitions Tax to the Revenue of €6,600”.
The above is a simple example of how the tax free thresholds work. The Revenue Commissioners have a page on their website which can answer most questions one may have about Capital Acquisitions Tax.