Retirement Relief Changes 2025

Retirement relief is a key tax relief in Ireland, benefiting individuals who sell or pass on business assets, often at retirement or when transferring a business to the next generation. The relief reduces or eliminates Capital Gains Tax (CGT) on such disposals, ensuring smoother business transitions and supporting the economy. Significant changes are coming into effect on 1 January 2025, and business owners should know the implications.

Qualifying Business Assets:

• Includes business assets such as goodwill, shares in trading companies, farming companies, or holding companies, provided the individual has at least 25% of the voting rights.

Lifetime Limit:

• General lifetime limit of €750,000 for disposals to individuals other than a child; €500,000 if the individual is aged 66 or over.
• There is no lifetime limit for transfers to a child unless the individual is over 70, in which case the limit is €3 million.

Age Limit:

• The upper age limit for CGT retirement relief is 65 years.

Ownership Period:

• The individual must have owned the business assets or shares for 10 years or more.

Qualifying Business Assets:

• No changes.

Lifetime Limit:

• A general lifetime limit of €750,000 for disposals to individuals other than a child applies to all individuals aged 55-69.
• There is a new €10 million lifetime limit for the disposal of business assets or farms to a child for individuals aged 55-69.
• The €3 million limit continues for individuals aged 70 or over.

Age Limit:

• Extended from 65 to 70 years.

Clawback Period:

• A new 12-year clawback period applies; if the child retains the assets for 12 years, no CGT is due.

Ownership Period:

• No changes.

Strategic Planning:

• Business owners should consider timing the sale or transfer of their assets to maximise tax relief benefits.
• Planning disposals before reaching the new age limit of 70 can be advantageous.

Intergenerational Transfers:

• The new €10 million cap and 12-year clawback period encourage long-term retention of family business assets, ensuring continuity within families and supporting the economy.

Formal Claims:

• Retirement relief must be formally claimed in an individual’s tax return, requiring careful documentation.

Business Structure Review:

• The upcoming changes may require a review of current business structures and succession plans.

Impact on Estate Planning:

• The new limits and clawback period should be factored into long-term estate planning strategies.