Worried about tax? Leading expert Alison has some choice advice.

Alison McHugh has almost 20 years’ experience advising high net worth families on their tax affairs, especially on inheritance planning. The partner and head of Private Client Services with EY Ireland has plenty of choice tips after the recent Budget and fast approaching deadline for the self-assessed to file their tax returns.

What are the main things people are neglecting to claim for in their tax returns that could save them a lot of money? 

Ensure that you have claimed all credits that you’re entitled to.  

For example:

• Where you are paying rent for a child that is in college, you may be entitled to claim tax relief on this.  

• You can claim tax relief on any medical expenses incurred during the year subject to some minor exceptions.  

• Remember also that it is not too late to make a pension payment and claim tax relief against your 2023 tax liability where you have not maxed out your personal contributions.  Where pension payments are made up to 31 October 2024 (14th November if you pay and file on line), you can claim tax relief in your 2023 tax return, subject to the normal limits which apply.

• Finally as the end of 2024 is approaching you might want to consider making gifts to children/grandchildren to use up the annual small gift exemption of €3,000.  This is a “use it or lose it relief” so if you do not avail of this exemption in 2024 it cannot be carried forward into next year.   

Speaking of inheritance tax, what exactly do the Budget changes mean?

Group Threshold	Existing	New
Group A	€335,000	€400,000
Group B	€32,500	€40,000
Group C	€16,250	€20,000

The Class A threshold (for transfers from parents to children) has increased to €400,000, the first increase since 2019.  This will result in a tax saving of c. €20k per child on gifts/inheritances from their parents.  

It was good to see an increase in the Class B and C thresholds* also which have not changed since October 2016.  

For minor or young adult children, the funds can be held in protected structures to ensure that there is a level of control around their ability to access the funds until such time as they are mature enough.

So you can gift your grandchildren amd save on inheritance tax? How does that work?

You can gift €3,000 to another person (tax-free annually).

This is commonly referred to as the small gift exemption.  Parents could use this small gift exemption to transfer additional value to their children.  

Whilst this may not seem significant the cumulative effect can result in a sizeable fund being built up.  

Are there other ways to make use of ‘gifting’ apart from that exemption (and experiencing gratitude while still around to enjoy it!)?

Parents who have the available cash to make gifts to children could also do so to use up their lifetime threshold. 

Doing this sooner rather than later will allow any growth in the funds to accumulate in the hands of the children free from CAT (inheritance tax) as they are beneficially entitled to the funds.  

For example, if parents are making an annual gift of €6,000 to their children from birth, then by age 30 this will result in a fund of €180,000 being built up for each child and that excludes any growth over the 30-year period.  

By contrast if a parent makes a cash gift of €180,000 to their child at age 30 this will eat into their lifetime threshold which ultimately results in a tax cost of c. €60,000 based on current tax rates.

Any other useful tips?

• Take advice.   

• Families need to firstly consider what is best from a commercial and family perspective before making important decisions around the transfer of wealth.

• Put a will in place.  

• Often parents are focused on ensuring their own affairs are in order but overlook the fact that children now have significant value in their own name and thus it is equally important for them to ensure that they have received appropriate advice around the management of their affairs.

What did your own parents teach you about money? 

My dad always said that you should “have some, save some and spend some”.  My parents always tried to teach us the value of money and the importance of saving some money for the unexpected.

What was your first job?  

My first job was packing bags in Quinnsworth in Phisboro when I was 16. I was paid £1.87 per hour!  

Guilty treat? 

After years of biting my nails, I now get my nails done every 2 weeks and that is my treat to myself.

*Class B includes very close relatives such as siblings, nieces etc; Class C includes uncles, cousins, grandnephews, friends etc. But it gets complicated – so check Revenue.ie for full details and/or discuss with your financial advisor.