Budget 2016 will offer some relief to children hoping to hold onto a family home gifted to them by their parents, as the tax free threshold for asset transfers from a parent to a child is set to increase by 24 per cent to €280,000.

The increase in the inheritance or gift tax threshold is expected to be the start of a process that will see the main threshold increase to € 500,000 over a three to five year period.

In his budget statement, Minister for Finance Michael Noonan said that the increase will apply in respect of gifts or inheritances received on or after tomorrow, October 14th.

The increase in the threshold is expected to cost the Exchequer €28m in 2015 and €33m in full-year 2016. There was been no change in the rate of capital acquisitions tax (CAT), at 33 per cent.

The move goes some way to mitigating the impact of a raft of reductions in the threshold. Since 2009, the thresholds for a child had plummeted from more than € 540,000 in early 2009 to just €225,000, while the rate of CAT also soared from 20 per cent to 33 per cent.

Before the announcement, figures from the OECD showed that Ireland has one of the toughest inheritance tax regimes in the world.

However Audrey Lydon, head of private client services with EY, said that the move will only go some way towards parents’ concerns that about the amount of tax that their children will have to incur after their death.

“While the increase in the Group A threshold is welcome it does not go far enough to alleviate the burden many families will endure when inheriting the family home,” she said, noting that CAT on the inheritance of a family home worth € 960k by two children (assuming no other inheritances or gifts from the parents) will still be in excess of € 130k.

“The real problem is the rate of tax at 33 per cent,” she said.

Mr Noonan said that he increased the Group A tax-free threshold, which applies to transfers between parents and their children, “in recognition of the recovery in asset prices, particularly property”.

But Beryl Power, senior tax manager, private clients, with PwC, agreed that the increase in the threshold won’t keep everyone out of the CAT tax net.

“It’s probably fair to say there will be still be sizeable (CAT) bills given the recent growth in property market, because the threshold is still substantially lower than the peak in 2009,” she said.

Some had hoped that the threshold would go as far as €500,000, but as was flagged earlier on Tuesday, the threshold will rise to €280,000 from tomorrow.

Mr Noonan mentioned no other changes to the regime, which means that the tax free threshold for those belonging to “Group B”, ie a parent, brother, sister, niece, nephew, and grandchild, will remain at € 30,150. Similarly, those in “Group C”, ie all other relationships, will only be able to inherit € 15,075 tax free.