Change to probate fees

probate

Date

Apr 11, 2019

Categories

Personal Finance

Back in March 2017 we posted an article about an upcoming increase in probate application fees, which was scheduled to take place from 1 May 2017.  The increases were deemed too high, and the changes didn’t come into effect at that time.  However, the Government’s proposal is still going ahead and preparations are currently underway to switch to a new probate fee structure.  This new structure entails a change from the previous flat rate fee to one based on the value of the estate.

 

A sliding scale

Until now the flat rate fee has been £215 (or £155 if you go via a solicitor), which applies to all estates in England and Wales.   Now, families are going to have to deal with a tiered system, with a sliding scale of increasing fees based on the net value of the estate for probate (which is different from that used for inheritance tax purposes).  If the estate in question is worth £50,000 or under then it will be exempt from fees.   Estates worth over £50,000 will be charged fees as follows, which will be on top of any inheritance tax due:

£50,000-£300,000: £250

£300,000-£500,000: £750

£500,000-£1m: £2,500

£1m-£1.6m: £4,000

£1.6m-£2m: £5,000

Above £2m: £6,000

Although the average probate fee is expected to fall in the £750 bracket, this still equates to over three times more than you would pay under current rules.   Meanwhile the number of estates which are valued under £50,000 (and will therefore exempt from probate fees), is relatively small.

These increases are being called a ‘fee’ for the provision of services, rather than a tax.  As they’re not officially a tax, the planned increases have not been included in the Finance Bill, and have not had to be voted on by MPs.  However the date for their introduction, which was scheduled for 1 April 2019, has been delayed due to the ongoing parliamentary discussions surrounding Brexit.   An approval motion needs to be scheduled in the House of Commons, and the increase will then come into force 21 days later.  According to the Ministry of Justice, the increases will come into force ‘as soon as parliamentary time allows’.

 

A temporary process for probate

In the meantime, as HMRC continues to make its preparations to switch to the new fee structure, it has introduced a temporary process for probate applications.

Usually, whoever is dealing with the deceased’s estate must first submit an inheritance tax account to HMRC, which will be processed before any application for probate can be accepted.  However, due to the new fee structure being introduced by the government, HMRC has put in place a temporary exemption and will accept applications for probate before an inheritance tax account has been processed.

The important thing to remember is that the probate application must include a note to say that the appropriate Inheritance Tax forms will follow shortly.

The advice to anyone who has been recently bereaved is that they should start their application for probate as soon as possible.  The current exemption introduced by HMRC should hopefully provide enough time to submit a probate application form before the fee hike comes into effect.

 

Planning for the future

Going forwards it is advisable to plan for the need to settle a high probate fee on a deceased’s estate. If there are sufficient cash assets in the estate it is expected that banks and building societies will release funds to settle the probate fee in a similar way as they currently do for funeral costs and inheritance tax.  Having sufficient cash assets available should make it easier for any successors to deal with the probate process.

It’s worth bearing in mind with these new probate fees that in future greater focus should be placed on inheritance tax planning.  Money issues can be one of the greatest causes for argument within families, so it’s important to have the right planning in place well in advance to avoid the likelihood of these problems occurring.   Please get in touch with the team at Paish Tooth if you would like any help or advice on how to ensure that your money is being handled in the best way possible.