The Government is planning substantial changes to the level of probate fees. The changes were announced in November 2018 and were expected to come in to force in May 2019. Final approval has been delayed due to parliamentary Brexit negotiations; however, they are expected to go ahead.
The new legislation, which will apply in England and Wales, will raise the estate value threshold from £5,000 to £50,000, which will exclude around 25,000 estates from probate fees altogether. However, people who inherit more than £50,000 will have to pay the levy before the court will give the executors ‘probate’, which allows them to collect and distribute the property, money and possessions of the person who has died. It will apply to all estates – even those left to a widow or widower who is exempt from IHT.
What are the probate fees?
At the moment probate costs a flat fee of £155 when a solicitor is involved and £215 if it is done personally. The charges will rise on a sliding scale and will range from £250 to £6,000 depending on the size of the net estate after debts have been paid.
Expected probate fees in England and Wales
The new fees will be based on the net value of the estate after debts but before inheritance tax is paid;
|Value of estate||Current fee||New fee||No of estates per year|
|Up to £5,000||£0||£0||241,000|
|£5,001 to £50,000||£155/£215||£0||23,000|
|£50,001 to £300,000||£155/£215||£250||126,000|
|£300,001 to £500,000||£155/£215||£750||59,000|
|£500,001 to £1m||£155/£215||£2,500||30,000|
|Over £1m to £1.6m||£155/£215||£4,000||5,000|
|Over £1.6m to £2m||£155/£215||£5,000||1,500|
Source: Ministry of Justice November 2018 and Freedom of Information response August 2017.
No IHT to pay, but new probate fee to pay
The new fee will be a shock to many people who inherit a house and savings that are well below the threshold for IHT but will nevertheless face this new levy. Around 200,000 estates will pay the charge even though they will not pay IHT.
Difficulties could arise where there is no immediate access to funds in the Estate, for example if the Estate comprises just a house or investments and a Grant is needed for release of funds. It may fall upon the beneficiaries to fund the probate fee until the estate assets are administered.
Why the change?
The Government says it spends £1.6 billion running the court service but raises less than half that in fees. The extra £145 million from this new tax will reduce the cost of the courts to other taxpayers.
If you would like to find out more about these proposed changes, please contact one of Springfield Financial Services’ Chartered Financial Planners on 01772 729742.