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Probate ‘stealth’ tax given green light for April

22/02/2019

Government plans to change the way probate fees are calculated have been approved and will take effect from April this year. Lodders’ Private Client partner, Louise Igoe, explains.

The new rules could mean an extra £6,000 in death taxes for many grieving families.

Probate law specialists at Lodders are urging people to take action in a bid to beat the change.

Louise Igoe, a partner in Lodders’ Private Client team, says: “Often, applying for probate and finalising the estate of a loved one is something bereaved families put off or delay. If you have a chance to conclude these matters before the new charging structure comes into force in April, it would be advisable to get things moving.”

Currently, families pay a flat £155 fee for probate, the charge for securing legal control over a deceased person’s estate. After the new system comes into force in April, the charge will rise according to the value of the estate.

Sliding scale of fees

Whilst the government claims the new fees system will ‘see thousands of bereaved families paying no probate fees at all’, the planned sliding scale of fees is little more than a means of generating more tax, says Louise:

“Probate fees should cover the cost of a service. Having a sliding scale based on the value of an estate indicates that this is, in fact, an extra tax, despite government ministers refuting this and claiming it is just a fee to cover the cost of families sorting the estate after a loved ones’ passing.

“Extra income generated through the fees systems will go to the courts and tribunals service to plug a shortfall.  This is a further sign that this is a tax and not simply a way to cover the cost of obtaining a grant of probate.

“This change will have a direct impact on the people who need to get a grant of probate,” she adds.  “The fee needs paying up front at a time when the assets of the deceased are frozen. Yes, the cost is due back from the estate, so executors will not end up personally out of pocket in the long run, but in the short term, they will suffer. They must wait for the probate to be granted and the estate finalised before they can hope to recover the costs.”

Calculation

The new probate fees scale is calculated on the value of the estate before inheritance tax. Estates valued at up to £50,000, or exempt from requiring a grant of probate, carry no fees.  Those valued between £50,000 and £300,000 will pay fees of £250. Fees for those valued at £300,000 to £500,000 will be £750, and for estates of £500,000 to £1m the fees will be £2,000.

For estates over £1m, fees are £4,000, £1.6m to £2m are £5,000, and a fee of £6,000 applies for estates valued at £2m and above.

Estimates claim that 280,000 families a year will have to pay more under the new fee structure, with 56,000 facing bills of between £2,500 and £6,000.

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For more details on this story, please contact Louise Igoe on 01789 206156 or via email.