The 3,000 euro yearly gift exemption and your threshold.
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The 3,000 euro that never touches your threshold
Capital Acquisitions Tax is the tax on gifts and inheritances, charged at 33 percent. The small gift exemption is the quiet workhorse of family tax planning around it. Each person can receive up to 3,000 euro from any one donor in a calendar year completely free of CAT, and this slice never counts against the lifetime group threshold. It resets every year, and it is per donor, which is where the real planning power lies.
Because it is per donor, a child can receive 3,000 euro from each parent every year, so 6,000 euro a year into a child’s name without any CAT and without using a cent of their large Group A threshold. Over a childhood that compounds into a substantial transfer that is entirely outside the tax net. Grandparents, aunts, and uncles can each do the same, which is why families use it to move wealth down the generations steadily rather than in one taxed lump.
A 25,000 euro gift from an aunt, worked through
Suppose an aunt gives her niece 25,000 euro. An aunt to a niece is a Group B relationship, where the lifetime threshold is 40,000 euro. The niece has already received 30,000 euro of earlier benefits in Group B, so only 10,000 euro of threshold remains. First the 3,000 euro small gift exemption comes off, leaving 22,000 euro. The remaining 10,000 euro of threshold absorbs part of that, and the final 12,000 euro is taxed at 33 percent.
The chart shows how the 25,000 euro gift is sliced: a tax-free top layer, a layer that uses the last of the threshold, and a taxable layer that triggers the 3,960 euro bill.
The aggregation rule that surprises families
CAT thresholds are lifetime and cumulative within each group, counting back to gifts received since December 1991. People think of the 400,000 euro Group A threshold as a generous annual allowance and gift large sums assuming each year starts fresh. It does not. Every taxable gift and inheritance in the same group adds up, and once the running total passes the threshold, the 33 percent rate applies to everything above it. The small gift exemption is the one piece that genuinely resets each year, which is exactly why it is so valuable.
A practical mistake worth avoiding: paper the trail. If you are moving 3,000 euro a year to a child or grandchild, make the transfer a clean, dated bank payment rather than cash, and ideally to an account in the child’s name. Years later, if Revenue ever queries a deposit, a clear record of annual small gifts is the difference between a quick explanation and a tax assessment.
Gift planning questions
Does paying a grandchild’s school fees count as a gift?
It can. Paying someone else’s bills is a benefit and is treated as a gift for CAT, though the small gift exemption can cover up to 3,000 euro of it per donor each year. There is also a separate relief for the normal support, maintenance, or education of a child, so the position depends on the exact circumstances.
When do I have to file a CAT return?
You must file an IT38 return once the total taxable benefits you have received in a group reach 80 percent of the relevant threshold, even if no tax is yet due. Gifts taken in the year to 31 August are filed and paid by 31 October of that year.
Can two donors combine their small gift exemptions into one 6,000 euro gift?
The exemption is 3,000 euro per donor, so two parents could each give 3,000 euro, totalling 6,000 euro tax free to the same child. Just make sure each 3,000 euro genuinely comes from a separate donor, ideally from separate accounts, so the per-donor nature is clear.