November 2016        

Inheritance tax

Parents to son or daughter

The recent budget increases the tax-free allowance on such inheritance by €30,000 (from €280,000 to €310,000). The rate, at 33 per cent, remains the same.
     What they didn’t tell us in the budget is that where the inheritance was a business or a farm, the effective allowance is increased by €300,000: from €2.8 million to €3 million. This is because of the 90 per cent business relief introduced in the 1997 budget.

Business asset inherited in 2017

Asset€4,100,000
90% relief (exempt from tax)€3,690,000
Taxable before allowance€410,000
Allowance€310,000
Taxable at 33%€100,000
Tax€33,000
Excess of inheritance over effective relief    €1,000,000
Effective rate of tax on business assets3.3%

PAYE worker

Inherits a house worth         €410,000
Allowances (2017)      €310,000
Taxable at 33%      €100,000
Tax      €33,000

     The tax payable on €410,000 is the same as the tax payable on business assets worth €4.1 million because of the 90 per cent relief.

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