New "Death Tax" to hit bereaved families as Ministers hike probate fees
The cost of securing legal control over a deceased person’s estate will soar next April from £215 to as much as £6,000
Government has announced it will introduce a sliding scale of fees to take legal control over a deceased’s estate, including any property.
The new ‘death tax” will dramatically increase fees paid by many families when applying for probate to sort out the affairs of a loved one.
Bereaved relatives must typically apply for probate before any property, possessions or money can be divided up between beneficiaries. Probate must be granted before the deceased’s home can be sold, for example.
Currently, the fee for probate is a flat £215 for individuals and £155 for those applying through a solicitor.
The Ministry of Justice is now set to abolish the flat fee and introduce a sliding scale based on the value of the estate. Fees will range from £250 to as much as £6,000 for estates worth more than £2million.
Estates with a value between £1m and £1.6m will have to pay £4,000 in probate fees. Many families in London and the South East could be hit as rising properties prices have led to increased wealth.
For example, an estate valued at £500,001 will face a bill of £2,500. Some 20 per cent of families who pay fees are expected to need to fork out at least this amount.
Meanwhile, estates estimated to be less than £50,000 will be exempt – compared with the current less generous threshold of £5,000.
The charge is in addition to inheritance tax which is levied at 40 per cent of assets above the individual’s allowance of £325,000.
Legal groups and opposition MPs have accused government of sneaking in a stealth tax just a week after the Budget. The Ministry of Justice (MoJ) is expected to raise £185m from the charges by 2022-23.
Government denies it’s a tax
A MoJ spokesman denied the charge was a ‘tax’ and said money raised will be ring-fenced to help fund the courts and tribunal service. The spokesman said it was a ‘fair and progressive” way of paying - and about 80 per cent of applicants will pay £750 or less.
The wealthiest estates will pay 70 per cent less than the £20,000 cap proposed last year, said Justice Minister Lucy Frazer.
It is thought the new sliding scale of fees could come into force as early as April 2019. About 250,000 grants of probate are made each year.
People pay their probate fees at the same time as sending their probate application form to the Probate Registry. Some families may have to take out loans to cover the steep hike in fees before they can reclaim it back from the deceased individual’s estate.
The Law Society, the professional body for solicitors, has accused government of “increasing inheritance tax by stealth.” President Christina Blacklaws said: “The government had the opportunity at the budget just last week to increase funding for the justice system after a decade of austerity instead they chose to continue the cuts which have seen thousands denied the ability to access” (the justice system).
Lakshmi Turner, chief executive of Solicitors for the Elderly, said: “This stealth tax, although much lower than before, is still unjustifiable as the probate process will not require additional work or resources.”
Ms Turner said it was “extremely unclear” how executors will pay the higher fees as assets are frozen until the executors receive grant of probate.