Capital Acquisitions Tax (CAT) & Capital Gains Tax (CGT)
The rate of CAT is unchanged at 33%.
CAT Tax Free Thresholds
| |
Group |
2024 Threshold |
2025 Threshold |
| A |
Son/Daughter, minor child of deceased child |
€335,000 |
€400,000 |
| B |
Lineal Ancestor/Descendent, brother, sister, nice, nephew |
€32,500 |
€40,000 |
| C |
Any other person |
€16,250 |
€20,000 |
This is the first change in the CAT Thresholds since October 2019. The threshold used depends on the relationship between the disponer and the beneficiary. A ‘child’ includes an adopted child and a stepchild.
Each threshold is cumulative and applies to the total taxable benefits received from parties in that group. The taxable value of any previous gifts and inheritances received since 5 December 1991 within the same group are aggregated.
No tax is payable on a gift or inheritance if its taxable value is below a particular threshold. You must pay tax on any remaining value above that threshold.
Capital Acquisitions Tax -Agricultural Relief
Introduced in this budget is the new requirement for the donor (person giving the gift) to also meet the Active Farmer Test for the beneficiary to avail of Agricultural Relief.
The conditions for a beneficiary (recipient of a gift or inheritance) to avail of CAT Agricultural Relief are set out as follows:
- The beneficiary must meet the Farmer Test (the 80% agricultural property test) on the valuation date
- Both the donor and the beneficiary of the property subject to the relief must satisfy the Active Farmer Test as set out below. More detail on the operation for the donor will be in the Finance Bill
To meet the Active Farmer Test both the donor and the beneficiary must either:
- Hold (or obtain within 4 years of receiving the property) a recognised agricultural qualification (as listed for the young farmer stamp duty exemption qualifications listed in schedule 2 or 2A to the Stamp Duties Consolidation Act 1999) AND who farms the property on a commercial basis with a view to the realisation of profits for a period of 6 years from the valuation date for the property. OR
- Spend 50% of that individual’s normal working time* farming agricultural property (including the property received) on a commercial basis with a view to the realisation of profits for a period of 6 years from the valuation date for the property. OR
- Lease the whole or substantially the whole (75% by value) of the agricultural property, comprised in the gift or inheritance for a period of not less than 6 years commencing on the valuation date of the gift or inheritance, to an individual who satisfies either of the previous two criteria.
*Definition of “normal working time”
- Normal working time including both on-farm and off-farm working time approximates to 40 hours per week.
- An individual spending an average of 20 hours per week working on the farm will meet the 50% of normal working time criteria.
- Where it can be shown that an individual’s normal working time is less than 40 hours a week, then the 50% requirement will be applied to the actual hours worked, subject to the overriding requirements that the farm be farmed on a commercial basis and with a view to the realisation of profits.
Capital Gains Tax (CGT)
The rate of CGT is unchanged at 33%.
Capital Gains Tax – Retirement Relief
This relief is available to individuals who dispose of eligible chargeable business assets on or after reaching the age of 55. From 1st January 2025 a number of changes are being implemented to the operation of the relief in particular where disposals are made to children.
From the 1st January the upper age limits applicable in order for the maximum limits for the relief to apply rises from 66 years to 70 years. The minimum threshold age in order to qualify for retirement relief remains at 55. In addition a new upper limit of €10 million worth of asset values will apply for disposals to a child that take place prior to the disponer reaching the age of 70. Previously there was no upper limit on this relief where the disponer had not reached the age of 66.
This budget also introduces a CGT clawback period of 12 years on the recipient for disposals over €10 million on which Retirement Relief was claimed. The normal clawback period applying for Retirement Relief is 6 years.
CGT Farm Restructuring Relief
To enable farm restructuring, relief from Capital Gains Tax has been available (subject to conditions) where land is disposed of by either sale or exchange and the proceeds have been reinvested into other land resulting a new farm holding with reduced distance between the parcels that make up the holding
The deadline for the completion of the first restructuring transaction is 31st December 2025. Both restructuring transactions must be completed within a 24 month period.
The guideline document for this relief (& Consolidation Relief from Stamp Duty) is available here
Capital Gains Tax – Entrepreneur Relief
This relief applies a reduced CGT rate of 10% on gains from the disposal of qualifying business assets. Assets owned by both sole trader and companies and used in the trade could potentially qualify.
There is a lifetime limit of €1 million on the gains that you can claim relief on. Only gains on disposals made on or after 1 January 2016 are counted in the limit. You must have owned the business assets for a continuous period of three years. The three years must be in the five years immediately prior to the disposal. The business asset must be used for a qualifying business.
More details on the operation of the CGT Entrepreneur relief are available here
