The UK’s Ministry of Justice has introduced a new probate fee of 0.5% on an estate worth £50,000 or more, though it has set a cap of £6,000 for estates worth over £2m.
But by increasing the threshold for which the probate fees are incurred to £50,000 from the existing £5,000, the new structure does lift around 25,000 estates annually out of fees altogether.
Fees are also been capped at 0.5% level (instead of the 1% initially proposed), meaning around 80% of estates will now pay £750 or less.
Parliamentary under secretary of state for justice Lucy Frazer said revenues from the new fee system, which the government announced it was planning back in February 2017, will go, in their entirety towards running costs for the courts and tribunal services.
In the UK, probate fees are paid to the government to receive approval for the distribution of a deceased person’s estate. The new service also allows people to apply for grant of probate online and access digital support for those unable to pay for a solicitor.
Extortionate fees
However, the industry still has major reservations about the legislation.
“The probate fee fiasco of last year has started to fade from public memory,” said Rachael Griffin, tax and financial planning expert at Quilter. “After keeping tightly lipped they have now revealed they are pressing ahead with a tiered structure. While the detail of the charges are yet to be revealed, the change will still mean a heftier sum for those with larger estates.
“The replacement of the flat rate probate fee of £215 (or £155 if using a solicitor) will likely mean people with large estates will face extortionate fees and, with property values at historically high levels, the number of estates falling into a top band are likely to be quite high.
“So, despite the reassurances it’s hard not to see this as a stealth tax on those who already pay inheritance tax. Easing the burden on lower estates and lifting 25,000 annually out of probate is admirable, but it still means for others they will face a steep fee during an emotional and challenging time.”
‘New death tax’
Similarly, Nick Rucker, national head of tax, trusts and estates at Irwin Mitchell Private Wealth, claimed the reform was a “new death tax” even though the current fees already cover the cost of providing such service.
“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.
“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.”
