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Probate ‘tax’ introduction from April 2019

25 April 2019

In its commentary on the economic and fiscal outlook published alongside details of the Spring Statement, the Office of Budget Responsibility (OBR) has highlighted that the government has altered its proposed schedule of fees payable for an application for a grant of probate. The new rates take effect from April 2019, and range between £250 and £6,000, depending on the value of the estate.

What has changed?

Prior to the change, bereaved relatives paid a flat £215 fee for probate, the charge for securing legal control over a deceased person’s estate. It is estimated that the increase will mean that each year, some 300,000 estates will face larger bills. The charge will rise according to an estate’s value, leaving some 56,000 estates having to pay between £2,500 and £6,000. The change in fees represents a 2,700% increase in cost for estates valued over £2 million.

The OBR highlighted that, given the structure of the fees, the Treasury expects the Office for National Statistics (ONS) to classify it as a tax on capital rather than a payment for a service.

An increase in tax receipts

The new probate fee structure is expected to generate £155 million a year in additional tax receipts. There will be a small knock-on effect to inheritance tax receipts due to the incentive for individuals with estates worth close to thresholds in the new probate fee structure to reduce the value of their estates (through genuine or contrived means) to pay a lower fee. This effect is expected to be relatively small (around £5 million a year) since the inheritance tax liability itself already provides a significant incentive to reduce the value of estates. The Government has decided to offset the expected yield from probate fees by removing the same amount in ‘negative spending’ from the Ministry of Justice departmental budget.

The Treasury is now facing calls for the new proposals to be debated as part of the Finance Bill process.

View the OBR report entitled Economic and fiscal outlook (March 2019) here.

For further information about this topic, please call Alison Henshaw on 0191 567 8611 or e-mail a.henshaw@uhy-torgersens.com.

As one of the leading firms of accountants in the North East, with offices in Newcastle, Sunderland and Jarrow, we have the expertise to advise you on a wide range of tax-related issues.  If you would like to speak to one of our local experts, please call 0191 567 8611 or e-mail info@uhy-torgersens.com.