Exemption for Dwelling House
You might inherit or receive a gift of a house. If you do and you qualify for the Dwelling House Exemption you will not have to pay Capital Acquisitions Tax (CAT).
Qualifying conditions for an inheritance on or after 25 December 2016
The Finance Act 2016 introduced changes to the qualifications which apply to inheritances on or after 25 December 2016. You will be exempt from CAT on a house you inherit if:
- The house was the only or main home of the person who died (this condition does not apply if you are a dependent relative).
- You lived in the house as your main home for the three years before the person’s death.
- You do not own, have an interest or a share in any other house, including one you acquired as part of the same inheritance.
- The house is your main home for six years after you receive the inheritance. This does not apply if you are over 65.
Qualifying conditions for a gift on or after 25 December 2016
If you receive a gift of a house on or after 25 December 2016, you will be exempt from CAT if:
- You are a dependent relative of the person making the gift because you are:
- permanently and totally incapacitated due to a physical or intellectual disability, and you are unable to earn a living
- 65 years or older at the date of the gift.
- The house was your main home for the previous three years.
- You do not own, have an interest or a share in any other house.
- The house is your main home for six years after you receive it. This does not apply if you are over 65.
Qualifying conditions for an inheritance or gift before 25 December 2016
You might have received a house as a gift or inheritance between 1 December 1999 and 25 December 2016. If you did, you will be exempt from CAT if:
- The house was your main home for the previous three years. Where you received the house as a gift:
- any period of time the person making the gift lived in the house will not count towards the three years. Unless you lived with the occupant due to their ill health or old age (65 or over).
- the house must have been owned by the person giving it to you for three years before you received it.
- You did not own, have an interest or a share in any other house.
- You continued to use the house as your main home for six years. This does not apply if you were over 55 at the date of the gift or the inheritance.
Withdrawal or clawback of the exemption
The dwelling house exemption will no longer apply if, during the six-year period after qualifying for the exemption, either you:
- Sell the house, and it is not replaced by another as your main home.
- No longer live in the house as your main home. Unless this is due to ill health or employment commitments imposed on you by your employer. Ill health must be confirmed by a registered medical practitioner.
You might sell the house and do not use all the money from the sale to buy a replacement home. If you do, the exemption can be clawed back in proportion to the amount left over.