Change Will Hit Many Estates In The UK
The government announced new legislation yesterday (5 November) to introduce higher fees for grant of probate, which could cost households thousands more in charges.
The proposals will cap fees at 0.5% of the total value of the estate and will raise the minimum threshold for the value of estates paying probate fees from £5,000 to £50,000.
The move means estates worth £2m or more could pay £6,000 in probate fees – up massively from the existing £155 charge - which experts at Irwin Mitchell Private Wealth warn will hit many estates.
Expert Opinion
“The announcement that hugely increased probate fees are going ahead in April - a new ‘death tax’ - is a new tax in all but name and could have serious consequences for the collection of inheritance tax.
“It is described in the Minister’s statement as ‘a fair and more progressive way to pay for probate services’ which is misleading as the current fees cover the cost of providing this service. It is laudable to lift the lower value estates out of paying fees at all, by raising the threshold value of estates to £50,000, but it is being used as a way to raise more money to ‘be spent on running the courts and tribunal service’ – or rather, a tax.” Nick Rucker - Partner
Specialists at Irwin Mitchell Private Wealth predict the news will put many people in a worse-off position, particularly those who are ‘asset rich but cash poor’, and may even lose the government large swathes of inheritance tax.
“It will present real problems for those who have land but don’t have cash. An example would be widows where the property remained in the name of a late husband: in such a case no inheritance tax would be payable, but a widow would still need to pay the much higher fee in order to get probate and the property transferred into her name.
“It’s also potentially going to lose a lot of inheritance tax for the government and prove counterproductive as a measure. Many providers of ‘trusts to avoid probate’ will get people to pay for setting up trusts in their lifetimes so that probate is not needed when they die.
“There are already such schemes out there, often sold with dubious claims, and it is likely they will be sold even more aggressively now. People may be enticed to sign up to them and once set up, there is a risk that these trusts do not pay the proper tax that is due on a death because an inheritance tax account is one of the essential elements of obtaining probate.
“These plans are an improvement on the original ones, with the max fee at 0.5% of the value of an estate when it was to have been up to 1%, but we anticipate serious ramifications from this announcement.”