Bridging the tax border: How to manage inheritance across Northern Ireland and the Republic
QUESTION: I’m nearing retirement and have worked hard over the years to build up a business and investment properties across Northern Ireland and the Republic of Ireland. With recent headlines about changes to Inheritance Tax reliefs in the UK, is there anything I can do now to help minimise the tax my family may face in the future?ANSWER: As retirement approaches, it’s natural to start thinking about how your wealth will pass to the next generation. For many business owners and property investors, recent headlines around changes to Inheritance Tax (IHT) reliefs have added uncertainty. The good news is that there are practical steps you can take, even where your affairs span both Northern Ireland and the Republic of Ireland.In the UK, IHT is typically charged at 40% on estates above certain thresholds. However, these thresholds have been frozen for several years, meaning more estates, particularly those with property, are being caught. Where you hold assets on both sides of the border, things become more complex. Depending on your residence and where your assets are based, both UK IHT and Irish Capital Acquisitions Tax (CAT) may apply. Although double taxation agreements exist, careful coordination is key to avoid paying more tax than necessary.Business and agricultural reliefs remain key components of effective estate planning. Business Property Relief (BPR) and Agricultural Property Relief (APR) can significantly reduce the value of qualifying assets for IHT purposes; however these rules have tightened. From 6th April 2025, 100% relief has been capped at £2.5 million, with only 50% relief applying on values above this threshold. With these reliefs under increasing scrutiny and the potential for further change, proactive planning is essential rather than relying on current rules remaining unchanged.Gifting is another common strategy. Broadly speaking, assets gifted during your lifetime can fall outside your estate if you survive for seven years after making the gift. However, this is not without risk. You need to ensure you retain sufficient income and capital for your own retirement, and some gifts, particularly involving property or business interests, can trigger immediate tax charges if not handled correctly. Cross-border gifts also require care, as Irish CAT may apply even where UK IHT is reduced. A phased, well-structured approach to gifting can be very effective.How your assets are held can also make a meaningful difference. For example, joint ownership may help simplify the transfer of assets on death. Structures such as trusts or family investment companies can provide greater flexibility and control over how wealth is passed down through generations. Likewise, reviewing your business structure ahead of a potential sale or succession can help preserve valuable reliefs. While these options are not suitable in every case, they are worth exploring as part of a wider plan.For those with cross-border interests, one of the biggest pitfalls is planning in isolation. A strategy that works well for UK tax purposes may create an unexpected liability in Ireland, and vice versa. Taking a coordinated approach across both jurisdictions can help avoid these issues.Finally, timing is key. The most effective estate planning is carried out well in advance, giving you flexibility and peace of mind. With tax rules evolving and more estates being drawn into the tax net, doing nothing can become a costly option.By taking advice early and keeping your plans under regular review, you can help ensure that more of what you’ve spent a lifetime building is passed on to your family, rather than lost to tax unnecessarily.KellyAnne Murtagh (kellyanne.murtagh@aabgroup.com) is tax director at AAB Group Accountants Ltd (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
