Rising house prices over the past decade have pushed a growing number of people into the inheritance tax net, according to new figures from Revenue.
Dublin residents are by far the biggest contributors to the tax intake, with Galway/Roscommon reporting the greatest increase in taxpayers in the 10 years to 2021.
Some 12,530 people paid the tax in 2021, up by almost 30 per cent on 2011 and by 10 per cent on 2021, as inheritance tax receipts reached a record high of €481 million. This represents an uptick of 125 per cent on 2011 and 12 per cent on 2020. It means that the average inheritance tax bill in 2021 was €38,387, indicating average taxable inheritances of €127,959.
Current thresholds mean that children can inherit up to €335,000 tax free from their parents, with capital acquisitions tax (CAT) at a rate of 30 per cent applying thereafter. Back in 2011, when the tax free threshold stood at €332,084, just €50 million was raised from parent-to-child transfers. In 2021, however, rising asset prices sent this soaring to €175 million, an increase of some 250 per cent.
A Central Bank report from earlier this year showed that property was the second most common asset type, behind money, left in an inheritance, while the vast majority of those leaving inheritances were parents transferring assets to their children.
The biggest earner for the exchequer however comes from so-called Group B receipts, which reached €234 million in 2021, up from €124 million in 2011. The tax free threshold for this group, which covers transfers between grandparents/grandchildren and siblings, stood at €32,500 in 2021 compared with €33,208 in 2011.
When looked at geographically, Galway/Roscommon emerges as the region with the biggest increase in numbers caught in the CAT net. Back in 2011, for example, 227 people paid some €5 million in inheritance tax, or about €22,000 each, on average. By 2021 however, this had soared to 600 taxpayers paying €23.3 million in tax, or about €38,800 each, on average.
Kildare also reported a sharp rise during the period, with the numbers paying the tax rising from 240 in 2011 to 386 in 2021. Dublin, Carlow, Kilkenny/Laois/Meath also reported sharp increases.
When it comes to the county that contributes the most to returns, it’s no surprise that Dublin, with the highest house prices in the country, also has the highest inheritance tax receipts.
In 2021 for example, the amount of inheritance tax paid by the capital came to €267.32 million, accounting for 55.5 per cent of total receipts. Some 6,574 Dublin resident taxpayers, or 52 per cent of the total, paid the tax in 2021. Other big contributors include Cork, Galway/Roscommon, Kildare and Carlow/Kilkenny/Laois.
On the other side are the counties which pay the least amount of inheritance tax. In 2021, Clare topped this list, contributing 1.1 per cent of overall receipts with €5.3 million. The Banner County is also one of the few places where the number of taxpayers declined in the period, with 225 inheritance tax payers in 2021, compared with 256 in 2011. In terms of overall contribution, it is followed by Louth, with 187 taxpayers paying €5.8 million, or just 1.2 per cent of overall receipts, and Cavan/Monaghan, with 1.3 per cent of overall receipts at €6.3 million.