The forthcoming changes in the inheritance tax allowances that apply on death (potentially £1 million free of tax by 2020) are to be welcomed but these do not necessarily signal a movement towards further reduction in the taxes payable when someone dies. The fees payable to the Probate Registry to obtain a grant of probate by the legal representatives of an individual’s estate on death are set to increase at the highest end of the scale by over 9,000%.
A grant of probate is required to deal with property and liquidate many assets in an estate and is obtained by application to a Probate Registry which will review the documents lodged and then issue the formal document authorising the executors to proceed with realising the various assets. At present the application fee payable to the Probate Registry is fixed at £215 (£155 if made via a solicitor) regardless of the size of the estate.
In May the fees will increase to £300 for estates valued between £50,000 and £300,000 and £1,000 for those between £300,000 and £500,000, increases of 40% and 365% respectively. Click here for a full schedule of new probate fees.
It is no surprise that many commentators see these changes as nothing more than a stealth tax – a new and additional form of death tax. The government had consulted many people and organisations involved in probate work and, despite less than 2% of those responding agreeing with the level of increases, the government is pressing ahead with the changes.
The argument put forward by a government spokesman was that while the increase in fees was high in certain cases, they were necessary to subsidise other areas of the court system which in many ways confirms the view that these fees are a form of additional taxation. It is important to remember that the actual work undertaken by a Probate Registry will not change whatsoever following the introduction of the new fee rates. In other words the fee payable for an application for a grant of probate in April for an estate valued at £600,000 will be £215 yet in a matter of days later that fee will be £4,000.
These fees have to be paid “up front” and it is not always easy to have funds available to pay for estate administration expenses before a grant of probate is issued. While institutions that hold accounts on behalf of the person who has died are prepared to release funds to pay inheritance tax and funeral expenses, it remains to be seen whether this will extend to the higher Probate Registry fees.
At the highest end of the scale, an estate worth over £2 million will incur a fee of £20,000 and it has been estimated that the increases in Probate Registry fees will raise approximately £250 million a year for the government. Whilst many people would argue that it is only right that larger estates pay a higher fee, it is seen by others as a disproportionate form of inheritance tax for a service which will not differ regardless of estate value or complexity.
While one hand giveth………………………..
For an explanation of the new Inheritance Tax allowances – click here
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