The Small Gift Exemption in Ireland

In Ireland, Capital Acquisitions Tax (CAT) is charged at 33% on gifts and inheritances above the relevant tax-free threshold. For families looking to transfer wealth, this can feel like a heavy burden.

But there’s a simple, powerful, and often underutilised relief that can make a huge difference: the Small Gift Exemption. This exemption allows up to €3,000 per year, per person to be given completely tax-free - and it doesn’t reduce your lifetime Group thresholds.

Used strategically, this relief can save families tens of thousands of euro in CAT and is a cornerstone of good estate planning.

🔑 What is the Small Gift Exemption?

The Small Gift Exemption is a specific provision under Irish CAT law that allows:

• €3,000 per calendar year to be gifted or inherited tax-free.
• It applies per giver, per recipient.
• It is completely separate from the CAT thresholds (Group A, B or C).
• It can be used every year - but if you don’t use it, it’s lost.

Unlike many other CAT reliefs, this one is straightforward and carries no complicated conditions - but that simplicity is also why so many people overlook its power.

✅ How the Exemption Works in Practice

Example 1: Parents to Children

• A mother and father each gift €3,000 to their son.
• That’s €6,000 in one year, CAT-free.
• Over 10 years, that’s €60,000 tax-free from just one child-parent relationship.

Example 2: Grandparents to Grandchildren

• A grandmother has 4 grandchildren.
• She gifts each €3,000 annually.
• That’s €12,000 every year, completely outside CAT.
• Over 15 years, she has transferred €180,000 tax-free.

Example 3: Extended Family Wealth Transfer

• A married couple with 3 children and 5 grandchildren.
• Each parent can gift €3,000 to each of the 8 beneficiaries.
• That’s €3,000 × 2 × 8 = €48,000 per year.
• Over 20 years, that’s €960,000 transferred without paying CAT.

This is why the Small Gift Exemption is considered a “slow but steady” estate planning tool.

📊 Why It Matters for CAT Planning

CAT thresholds (from 2 October 2024) are:

• Group A (children, adopted children, stepchildren, grandchildren if parent is deceased): €400,000
• Group B (siblings, nieces, nephews, grandchildren): €40,000
• Group C (anyone else): €20,000

Anything above those limits is taxed at 33%.

But the Small Gift Exemption:

• Applies on top of those thresholds.
• Does not erode lifetime limits.
• Is available every single year.

This means families can chip away at potential future tax bills by gifting early and often.

⚠️ Common Misconceptions

1. “It reduces my threshold.”
   → False. The exemption is separate and does not count towards your lifetime thresholds.
2. “I can roll over unused years.”
   → False. It’s a use it or lose it relief - no carry forward.
3. “It only applies to cash.”
   → False. It applies to any asset worth up to €3,000 - cash, jewellery, art, shares, etc.
4. “It’s not worth the hassle.”
   → False. Small amounts add up - consistent use can save hundreds of thousands.

⚖️ How It Works with Other CAT Reliefs

The Small Gift Exemption can be combined with other reliefs for powerful results:

• Dwelling House Exemption: A parent could pass the family home tax-free (if conditions met) while also using annual gifts to cover maintenance costs.
• Business Relief: Annual €3,000 gifts can help reduce the value of business transfers outside the 90% reduction.
• Favourite Niece/Nephew Relief: Families often use both reliefs to keep businesses within extended family.
• Agricultural Relief: Farmers use the €3,000 gift rule alongside the 90% agri reduction.

💡 Advanced Uses

• Deposit Support for Children: Parents gift €6,000 annually to help children build property deposits without tax exposure.
• Wealth Diversification: Families gift shares, funds, or property interests each year to spread ownership gradually.
• Long-Term Gifting Strategy: Over decades, families can move large estates out of the CAT net entirely.

📈 Why Use Irish Tax Hub for Gifting Strategy

At Irish Tax Hub, we go beyond explaining the exemption - we help you maximise it:

• Document and track gifts for Revenue compliance.
• Model CAT savings over decades so you can see the benefit.

⚡ Book a consultation with Irish Tax Hub today — don’t waste another year’s exemption. Every January is a fresh opportunity to gift €3,000 tax-free to as many people as you wish.