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June 9, 2025
The Small Gift Exemption allows anyone in Ireland to gift up to €3,000 per person, per year, completely free from Capital Acquisitions Tax (CAT). Parents can therefore gift a child up to €6,000 annually (€3,000 from each parent), and grandparents or others can also contribute. To qualify, the gift must actually be transferred to the recipient — simply “earmarking” money in your own account doesn’t count. Missing this step can lead to costly tax bills later, as shown by a recent Tax Appeals Commission case where a family incurred over €65,000 in unexpected tax due to poor record-keeping and lump-sum gifting.
Discover how one mistake in saving for kids in Ireland cost €65,000 tax, and one mistake in bequeathing a home cost €77,000.
And learn how high-net-worth families in Ireland can try to protect their hard-earned savings through proper financial planning.
There are certain exemptions around saving and gifting to your children here in Ireland, but the conditions must be met in order to benefit.
Not meeting these conditions can be a costly and unexpected mistake dear reader, so pay attention!
If you’re building long-term wealth for your family, and particularly if you're considering saving or large gifting to your kids in Ireland, this story is worth a read!
A recent case before the Tax Appeals Commission shows just how costly it can be when good intentions don’t match the fine print of Irish tax law, which is often less than straight-forward!
A woman inherited her mother’s home and believed she qualified for the Dwelling House Exemption, which can eliminate Capital Acquisitions Tax (CAT) entirely in certain cases.
One of the main qualifiers for Dwelling House Exemption is that you (the receiver) don't own any other property or have an interest in any other property. The logic here is that only people who do actually live at home with the parent prior to death, can inherit the family home tax-free. It's not intended as an exemption for people who already have another property, irrespective of where they claim to live.
In this case, the woman lived in the family home with the parent prior to death. So she claimed the Dwelling House Exemption. She did live there.
However, Revenue disagreed. It was then advanced to the Tax Appeals Commission, who agreed with Revenue. Rejected!
Why?
Well, Revenue deemed that she still had a legal interest in a second property, and was not eligible for the Dwelling House Exemption.
The second property in question was her former marital home. Even though she hadn’t lived there in years, and even though the paperwork to transfer the property out of her name had been initiated, the transfer wasn’t completed before the inheritance occurred. Ouch.
Result? €77,500 in CAT, no exemption, and a painful financial lesson.
The Money was just resting in my account father!
Here's a real-life cautionary tale from a recent Tax Appeals Commission case, and it’s one we can all learn from.
Firstly, lets remind ourselves about the Small Gift Exemption. This allows anyone to gift anyone else up to €3,000 per year, with no taxation on either party. One of the conditions is that it must actually transfer from one person to the other, irrespective of whether they are parent-child, friend-friend etc. etc. The most you can transfer tax-free from one person to the other is €3,000, each year. This gifting, assuming it is done every year within the limits, does not eat into the Group A limits, where a child can inherit €400k from parents. In theory, a child could receive €6k per year from 2 parents over the course of 40 years for example, totally €240k, plus another €400k under Group A. They could, if done properly there, receive €640k totally tax free in such a scenario.
Back to the case! This ended up in the Tax Appeals Commission also, and centred around an individual who received a lump sum cash gift of €165,000 from his parents in 2021. They claimed this was a lump sum payment transferred to the son, of many years of accumulated gifts under the Small Gift Exemption.
Sounds great, but the Revenue came knocking, noting that the child had already used up his Group A tax-free threshold, adn this was a lump-sum payment made in that year. Therefore, this €165k meant a tax bill of €49,500 on that gift alone.
In 2022, the parents paid that tax on his behalf, and surprise-surprise, Revenue treated that as another gift! Ouch.
That second 'gift' added another €16,335 to the bill, bringing the total Capital Acquisitions Tax (CAT) liability to €65,835.
We refer to compound interest a lot, as a positive, but this was compound taxation, not fun!
The parents nor the child could have been too happy about this, so brought the case to the Tax Appeals Commission, hoping to get it overturned.
Their argument was this:
The money he’d received from his folks years before, €170,000 in 2017 and €19,000 in 2018, weren’t gifts in the traditional sense. Instead, he claimed they were the result of annual “small gifts” from his parents and two great-aunts dating back to the early ‘90s, which had been building up in the an 'ear-marked' account for the child.
As noted earlier, under the CAT rules, you can receive up to €3,000 per year from anyone tax-free, but you need to actually transfer the money to the receiver! Revenue won't buy the argument that 'The money was just resting in my bank account' ala Father Ted!
Unfortunately for our man, it appears there were no annual transfer, and no firm records to prove some claims. And even if his parents were the most trustworthy people on the planet, in tax terms, verbal evidence won’t cut it.
The Commission ultimately didn’t buy it. They said those earlier sums were definitely taxable lump sum gifts from the parents. So, that meant the CAT threshold had been eaten into well before the 2021 gift arrived. In other words, the Revenue were deemed correct to have issued the tax bill of €65,835.
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The Dwelling House Exemption can allow someone to inherit a home tax-free under Capital Acquisitions Tax (CAT) rules — but only if strict conditions are met. To qualify, the person inheriting must not own or have an interest in any other property, and they must have lived in the home as their main residence before and after the inheritance. A recent Tax Appeals Commission case saw a woman lose this exemption — and pay €77,500 in tax — because she still technically held an interest in a former marital home. Even incomplete property transfers can disqualify you.
If you're a parent or grandparent thinking about saving for your kids or grand-kids, gifting assets, or building a legacy, these cases highlight three essential truths, in my view:
Irish tax law is black and white. You either qualify or you don’t. “Nearly” doesn’t cut it when it comes to reliefs like the Dwelling House Exemption or Small Gift Exemption.
This situation could almost certainly have been avoided with timely legal and financial advice. If your financial picture includes property, business assets, or inheritance planning, getting proper guidance up front is vital.
That’s what we do at Informed Decisions Financial Planning; encouraging people to look at the 'big picture', to plan around it using tax, legal and financial planning. Ultimately, help people avoid expensive mistakes.
You can save substantial sums through well-structured wealth transfers, but only if you meet strict conditions.
Miss a step, and it could cost you dearly.
For families looking to build and pass on wealth, here are the most effective options we use regularly with clients:
The woman in the Tax Appeals Commission case (04TACD2024) didn’t do anything malicious or even careless. She was unfortunate I guess in that the transfer paperwork didn’t get finalised in time.
If you're focused on saving for kids in Ireland, building generational wealth, or gifting assets wisely, it's important to plan with precision, or at the very least to have a proper exploration of the options and the possible opportunities.
Don't find yourself 'doing a Father Ted' in years to come for the Tax Appeals Commission.....!
I hope this helps you avoid doing so!
Paddy Delaney.
The content of this site including blogs and podcasts is for information purposes only. Everybody’s financial situation is different and the content we share on our site and through podcasts may not be applicable to you.
The articles, blogs and podcasts are not investment advice. They do not take account of your individual circumstances, including your knowledge and experience and attitude to risk. Informed Decisions can’t be held responsible for the consequences if you pursue a course of action based on the information we share
The key is planning early and documenting properly. Irish families can avoid unnecessary Capital Acquisitions Tax by: Making regular annual gifts under the Small Gift Exemption (€3,000 per giver). Considering Section 73 policies to cover future inheritance tax bills. Using Bare Trusts for children under 18 to maintain structure and control. Seeking financial and legal advice before gifting or transferring property. With the right planning, families can pass on significant wealth tax-efficiently — but missing paperwork or timing can turn good intentions into expensive tax mistakes.
Informed Decisions are one of Ireland’s only remaining independent financial advice firms. We specialise in retirement & investment planning for successful individuals, so that our clients only have to retire once.
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