Changes to Capital Acquisitions Tax: An Examination
Finance Minister Jack Chambers is facing escalating demand from political circles to raise the capital acquisitions tax exemption – often referred to as gift and inheritance tax – by at least €65,000 to €400,000 in the forthcoming budget.
This push for change is driven by the desire to alleviate the potentially significant tax-duty that some adults may face if they inherit a high-value family home after the passing of their parents.
Current State of Inheritance Tax: A Glance Into the Present
A mere 21% believe their retirement savings will suffice to maintain their current living standards
At this point, under current regulations, a child can acquire assets valued at €335,000 tax-free from their parents. Any greater inheritance attracts a 33% tax.
High-ranking figures from both Fine Gael and Fianna Fáil have lobbied for an enlargement of the ‘Group A’ tax threshold, which predominantly applies to grown children receiving money from their parents.
Recent reports indicate that Taoiseach Simon Harris has expressed concern over the lack of synchronization between inheritance exemptions and escalating property values. He furthermore hinted at an imminent action targeted in the budget.
Public Response and Reactions
In 2022, both political parties voiced their displeasure when the Commission on Taxation and Welfare proposed a reduction in tax-exempt thresholds for inheritance tax instead of an increase.
Leo Varadkar, the Taoiseach at that time, likened some of these recommendations to proposals in the Sinn Féin manifesto.
Survey Reveals a Generational Divide
Under current rules, one can inherit goods valued up to €335,000 tax-free from their parents.
A fresh survey conducted by Spry Finance, which offers lifelong loans to those over 60, based on their home value, unfolded an intriguing generational split in inheritance views.
While 51% of those under 35 felt entitled to an inheritance, 43% of adults across all age groups disagreed. Only a meager 18% of all respondents ‘strongly agreed’ that young adults should expect an inheritance from their parents.
Fears over adequacy of retirement funds are also prevalent. Over 60% fear that their pension will not suffice to maintain their current lifestyle upon retirement. Only 21% believe their retirement savings will be sufficient.
With 52% of respondents being ‘confident’ of living comfortably for 20-30 years post-retirement, only 14% have ‘great confidence’ of doing so.
This extensive survey, encompassing 1,075 adults, was undertaken by Opinions for Spry Finance, an offshoot of Seniors Money, providing loans akin to equity release. Since its inception in 2021, Spry Finance has disbursed more than €150m in loans to over 2,000 homeowners.
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