Extortionate new “stealth tax” announced in the form of probate fees.
BREAKING NEWS: Extortionate new “stealth tax” announced in the form of probate fees.
Last night the Ministry of Justice unveiled plans to change the way probate is charged which could see relatives paying as much as £6000 to access their loved one’s estate. This announcement follows on the back of the “shelved” plans they proposed, but then promptly dropped amidst a huge backlash ahead of the 2017 general election.
In the UK when someone dies their assets are frozen until the executor or administrator is granted Probate. This grant is a legal document from the court allowing the executor authority to deal with the deceased persons estate. In order to apply for a Grant of Probate, fees are paid to the Government.
Currently, when the net estate value ( i.e. after funeral and debts are paid) is over £5000 the probate costs are a flat rate of £215 (£155 if using a solicitor). If the net estate is under £5000 there is no fee.
How much will Probate cost?
Last night Parliamentary Under Secretary of State for Justice, Lucy Frazer, announced they are pursuing a “banded structure” for probate fees based on the value of the estate, which is set to come in in 2019.
Full details are still to be shared but they have said that specified fees will be no more than 0.5% of the value of the estate, with a maximum fee of £6000 payable on estates worth more than £2m.
This will mean a £250,000 estate may end up paying £1250 in fees and a £500,000 estate £2500.
This is on top of Inheritance tax payable at 40% on assets above an individual’s £325,000 threshold.
Lower value estates are being taken out of this fee with the estate value threshold being lifted from £5000 to £50000. They estimate they will be lifting 25,000 estates annually out of fees altogether.
Why are Probate Fees going up
The reasoning behind this increase is the need to modernise and upgrade the courts system, with 1 billion pound investment. These plans include enabling people to apply online for a grant of probate.
Frazer states they are asking the users of the courts to pay more as this cost should not be passed onto the taxpayer. She argues that by asking users of the court to pay more where they can afford to, the court can then fund areas where they charge no fees to the vulnerable i.e. victims of domestic violence.
Launching the new system Justice Minister Lucy Frazer said: “This new banded fee model represents a fair and more progressive way to pay for probate services compared to the current flat fee and reflects our commitment to protecting access to justice by ensuring we have a properly funded and resourced courts system.
“We are also confident these fees will never be unaffordable.
However, it is still unclear how executors will pay these fees as the estate’s assets are frozen until probate is granted.
It’s also questionable how this tax on more valuable estates can be justified as the amount of work required to be done by the court is the same irrespective the size of the estate.
With property prices at an all-time high, this “stealth” tax will give the government’s coffers a healthy boost but will hit already grieving families hard.
For more information get in touch with us at Just Wills and Legal Services on 01342 477102 to book a free consultation.
This article is for general information only and does not constitute legal advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
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