9 November 2018
In 2017, the HM Courts and Tribunals Service proposed a massive hike to probate fees which would see the most valuable estates’ charges increase from £155 to £20,000. Victim of the calling of a snap general election, the proposal went in the bin at the eleventh hour and we all hoped we’d seen the last of it.
But unlike those people whose estates it potentially affects, the proposal has made it back from the dead having been re-tabled on 5 November 2018.
This second incarnation has been tempered slightly, the top level of fees payable now being £6,000. Nonetheless, and contrary to the justifications of fairness and progressiveness, the new scale represents a stealth tax on dying and has renewed suggestions from STEP that the charge may be unlawful (tax charges, which STEP consider a value based charging system to be, needing to be introduced by Act of Parliament following debate in the Commons rather than being slipped ‘in the back door’ through Statutory Instrument).
The new fees are expected to take effect in April 2019, although the draft instrument to introduce them notes that they’ll take effect 21 days after that order is made and so there is not yet any definite cut off date.
Whilst us professionals working in probate might see the humour in the language of the Statutory Instrument being out of date within one day of publication, thanks to a near simultaneous reform to the non contentious probate rules dispensing with the oaths and marking of documents referred to therein, the personal representatives of deceased family members being asked to find £6,000 to fund an application fee before they can seek the grant of probate which will let them actually sell or access the assets of the deceased will find little such humour.
The new scales of charging will be:
|£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|
Given where we are in the country, it’s likely that most homeowners can expect to be in at least the £2,500 bracket, if not higher.
What can you do about it?
There are one or two things that can be done.
Hurry up - If you are already administering the estate of a deceased person and have yet to apply for your grant, applying whilst the current regime is still in force is an easy win. A word of caution on that, though, as I’ve heard tales of woe from people who rushed to beat the 2017 anticipated hike and made half cooked Inheritance Tax returns as a result. They’re now looking at HMRC penalties for inaccuracies far greater than the application fee they hoped to avoid.
Give it away – the fee is based on the assets passing under the grant of probate, i.e. owned by the deceased at the date of death. Assets gifted in lifetime therefore will be unaffected. Of course, gifting assets simply to avoid an admin fee would be madness. But look at it another way – if you’re in the >£2m bracket then you’ve most certainly got an inheritance tax charge coming your way and could benefit from taking some expert tax advice over planning to manage that charge.
Share it – as with giving it away, the grant will not take into account assets passing by survivorship (those being assets in joint ownership – not to be confused with assets owned by multiple persons as tenants in common). Again, care is to be taken before simply putting everything in joint ownership to avoid the charge – these assets will pass under the law of survivorship regardless of any contrary intention in your will, and you could end up creating family inequality or assets not passing where you want. But for assets intended to pass between married couples or where proper advice has been taken this could be another way of mitigating these new charges (or even avoiding the need for probate altogether).
It’s good to talk
Here at UHY Hacker Young we can offer a full suite of tax planning and probate related services, helping your family plan for the future and then deal with that future when it comes. You’ve got as far as reading this article, so why not give us a call to see how you might benefit from our experience.
If you think any of the above may be applicable to you, please do not hesitate to contact me or your local UHY specialist to discuss your options.
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