Buying your first home is not simple especially in the current climate with high house prices & the interest rates. The small gift exemption available can be a great way to build up a fund that can be utilised by your children in the future. 

Everyone is entitled to an annual tax-free gift allowance of €3,000 in any calendar year without having to pay Capital Acquisitions Tax (CAT). This annual exemption can be utilised by multiple people, and the first €3,000 from each donor is exempt from CAT. It is also worth noting that the person making the gift does not need to be related to the recipients to qualify for the tax exemption, However, it's typically used by parents to gift money to their children or grandchildren.

For instance, if you want to give your daughter a €36,000 deposit for a house, you can use the small gift allowance over several years, as illustrated below:

Year 1 

Father to Daughter €3,000

Mother to Daughter €3,000

Father to Daughter’s husband €3,000

Mother to Daughter’s husband €3,000

€12,000

You can repeat this process in years 2 and 3, and your daughter will have a deposit without any tax payable on the gift. This can potentially save you up to €11,880 in Capital Acquisitions Tax.

To stay compliant from a Revenue perspective, you need to keep a record of the annual transfers, and ensure that the account the money is going into is in the name of the recipient.

With property prices so high, parents can feel pressured to finance their children's property purchases, but €6,000 a year is a significant amount of money. We would always recommend to our clients that if they are considering this option they should ensure that they have not neglected their own finances. 

If you would like to chat about this or any other aspects of your finances get in touch with us. 

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