Inheritance Tax 

Probate fees another tax

Alison Steed

Alison Steed

It is a hotly debated topic, one that could cost families dearly when the time comes and is due to come into effect at the beginning of April.

No, I am not talking about Brexit. I am talking about the ‘tax’ – which is how the Office for Budget Responsibility is likely to define it – on families in their darkest hours. I am talking about the rise in probate fees.

With all the Brexit noise going on, it has been easy to forget about this increase in death costs, which despite being heavily criticised in many quarters is going ahead regardless, in an unpopular move by the Ministry of Justice.

Instead of the current flat fee of £215 – or £155 if you use a solicitor – which applies to estates in England and Wales, bereaved families will instead be faced with a tiered system that will charge based on the value of the estate. Those estates up to £50,000 will be exempt from fees, then the fees are:

  • £50,000-£300,000: £250
  • £300,000-£500,000: £750
  • £500,000-£1m: £2,500
  • £1m-£1.6m: £4,000
  • £1.6m-£2m: £5,000
  • Above £2m: £6,000

To be fair, I cannot see too many people crying into their cornflakes for the people with estates worth £2m or more having to pay £6,000 for probate. But that really misses the point. The current system is based on recouping costs, which at a time of grief is really what we should expect.

The new system is undoubtedly a tax, and while some people will be smugly thinking it is ‘the rich getting what they deserve’, it is hard to argue that anyone deserves a 3,770 per cent increase in costs just because their relative has been wealthy.

Besides, the reality for most people who are dealing with an estate is that they will face much higher costs themselves. Anyone who owns a property, for example, will be facing an increase in costs even at the very lowest end of the scale.

The MoJ expects that most estates will pay no more than £750. Well, when you consider the current probate fee is as little as £155, that still amounts to almost five times more than you would pay under the current rules.

Some comfort can be gained from the fact that estates below £50,000 are now exempt from probate fees, up from the current £5,000, but the number of those is still relatively small.

It means that inheritance tax planning will become a greater focus – something that should be commended in one way, since IHT is something of a ‘voluntary’ tax for those who choose not to plan to limit its impact.

It also means that advisers have an opportunity to help their clients in the coming months by ensuring they know about these changes, and prompt them to think about their estate planning.

The process of dealing with estate planning is never easy. Often you have to ask clients questions they may be uncomfortable with.