Some family homes are to be exempted from capital acquisitions tax (CAT), and inheritance taxes generally are to be sharply reduced. The changes take effect immediately.
The provisions announced in the Budget also mean those who still have to pay CAT on inherited houses are likely to do so at a significantly reduced rate - a flat 20 per cent will now apply, instead of the current rates of 20, 30 and 40 per cent.
In order to avail of the CAT exemption, the Minister for Finance has stipulated the house must be the principal private residence of either the owner or the beneficiary, who must have lived in it continuously for at least the previous three years. The beneficiary must not have an interest in any other residential property.
In addition, it will be a condition of the tax exemption that the beneficiary does not dispose of the home within the following six years.
Families who do not qualify for this relief will still benefit because of other significant changes in the Budget for those inheriting property.
The threshold at which capital acquisitions tax is applied to children of large property owners is to be substantially increased to take account of surging property prices, particularly in Dublin.
The exemption thresholds applicable to gifts and inheritances from parents will be increased from £192,900 to £300,000.
The "Class II" threshold - applicable to gifts and inheritances from brothers, sisters, aunts and uncles - rises from £25,720 to £30,000. The threshold in all other situations rises from £12,860 to £15,000.
"There will be a new single capital acquisitions tax rate of 20 per cent instead of the current rates of 20 per cent, 30 per cent and 40 per cent and it will apply uniformly to both gifts and inheritances, instead of the present situation where gift tax is three quarters of the rate applicable to inheritances," Mr McCreevy told the Dail.
The probate tax exemption threshold has been raised from £11,250 to £40,000.
The Minister's decision to increase substantially the threshold level was well signalled before yesterday but the property industry was taken completely by surprise when he abolished CAT entirely for some children taking over the family home.
The changes in CAT on the family home will cost the Exchequer £15 million in 2000 and £46 million in a full year.
The changes in CAT will be particularly welcomed by smaller families facing substantial tax bills on their legacies as a result of ever increasing house prices.
