What’s been dubbed a ‘stealth tax’ on the deceased has been introduced, increasing probate fees from £155 to as much as £6,000. Whilst a £6,000 fee on an estate valued at £2 million may not be especially concerning in isolation, the 3,770% increase is, in fact, part of a new tiered fee structure.
What is probate?
A grant of probate gives you the authority to administer and distribute the estate of the deceased. Upon death, all assets are frozen. Before you’re able to deal with bank accounts, property, pensions and investments, you’ll need to obtain the legal authority to act. This has, historically, been a simple fixed fee of £155.
The controversial tiered structure is:
|Value of estate
|£1.6m – £2m
|£1m – £1.6m
|£500,000 – £1m
|£300,000 – £500,000
|£50,000 – £300,000
In a written statement to Parliament, Justice Lucy Frazer MP said: “This new banded fee model represents a fair and more progressive way to pay for probate services compared to the current flat fee and reflects our commitment to protecting access to justice by ensuring we have a properly funded and resourced courts system.”
The above sounds specifically like it’s designed to significantly increase revenue, rather than ‘fair and progressive’.
When you consider that the probate office ultimately has to do the same work on every case, in spite of the estate’s value, surely this is effectively a tax? The new structure represents awful value for those living in the South East with higher value properties.
The changes, which are expected to be introduced in April 2019, make use of a parliamentary procedure known as a ‘Statutory Instrument’. A secondary form of legislation, this enables the Government to introduce and write into law changes, without full parliamentary scrutiny, as tax rule changes would.
Unlike other tiered taxes, such as Income Tax, the probate fee structure means that being just £1 over a threshold limit would cost up to £1,000 more. Where Inheritance Tax has allowances, exemptions and various planning opportunities to on occasion mitigate it entirely, the new probate fee appears to be a line drawn in the sand, which has quietly been introduced without much public attention.
Lucy Frazer MP continued “we are also confident these fees will never be unaffordable. The cost of the fee is recoverable from the estate and executors have several options to fund it. Moreover, the Lord Chancellor retains a power to remit a fee if he considers there are exceptional circumstances.”
At this time there is little that we can do about the fee itself, though we can of course continue to put plans in place to reduce the values of your estate, and those of your loved ones, mitigating inheritance tax due on death. This could also have the effect of reducing probate fees when due. If you would like to make provisions for your own Inheritance Tax planning, we have a highly qualified team of financial planning professionals available to offer advice, support and guidance.