Update following publication: A Parliamentary Committee have questioned the Ministry of Justice’s plans to increase probate fees to up to £20,000, stating that the proposal to impose a tax on estates, rather than the fee related to a transaction, is beyond the Ministry of Justice’s power.
Subsequent to these objectives, the committee has recommended the proposals for ‘special attention’ by parliament.The new probate fees were due to be introduced from May 2017, however this is likely to be delayed. We will continue to provide updates, but should you have any queries, do not hesitate to contact the office on 01923 224411 or contact Rebecca Potton.
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The government recently announced that probate fees will increase with the aim of helping to fund the modernisation of courts and tribunals service.
The change is anticipated to take effect from May 2017. There is no exact date yet, but the measure will be introduced via a statutory instrument.
What are probate fees?
When someone dies, the individuals organising their affairs must obtain a grant of probate or a grant of letters of administration from the Probate Registry before they are able to deal with the deceased’s estate.
A fee must be paid to the Probate Registry for dealing with the application for the grant. This is currently charged at a flat rate of £155 if solicitor makes the application, or £215 if made by an individual.
The new fees will be charged on a sliding scale and calculated according to the value of the estate. For larger estates, the fees are expected to rise significantly.
Value of the Estate and New Probate Fee
The current fee amount applies to all estates over £5,000. Under the new system, there will be no fees for estates worth less than £50,000. It will also see the new probate fee will be charged on estates before inheritance tax (IHT).
The fees will be calculated as follows:
- Estates worth: £50k-£300k will be charged £300
- £300k-£500k = £1,000
- £500k-£1m = £4,000
- £1m-£1.6m = £8,000
- £1.6m-£2m = £12,000
- Above £2m = £20,000
What will the impact be?
The government argues that 92% of estates will pay £1,000 or less and only a small percentage of estates will have to pay more than £4,000 in probate fees. The proposed increase to fees is significant; some commentators have described them as a stealth tax on estates.
The administration of an estate cannot begin until the grant has been issued. There are concerns that the increased probate fees will mean some families could struggle to pay the fee preventing them from accessing the deceased’s estate.
Possible Solutions
For individuals with larger estates, you are encouraged to review your success planning at the earliest opportunity. One solution which could minimise your probate fees is to take a life insurance policy, which if written into a trust, can be accessed immediately on death without the need for a grant of probate.
Another solution is to review the ownership of assets. The consultation document proposes changes to the approach of banks and other asset holders to the release of funds without a grant of probate, and these changes can help to alleviate the difficulties.
The introduction date of the new fees is yet to be confirmed. It is expected however that this will apply to applications for probate received after the date of introduction, rather than to deaths which occur after that date. To avoid the fee increase, applications must be received by the Probate Registry before the implementation date.
If you have any questions or concerns about probate fees, please contact Head of Tax, Rebecca Potton.