What happened to the Government’s new “death tax”?

In March this year, the government announced plans to introduce a tiered fee for obtaining the grant of probate upon death based on the value of the estate.

The proposed fee regime would move from a flat to a banded fee approach, proportionate to, and rising with, the value of the Estate, meaning fees could rise from £155 to £20,000 for those in England and Wales who die with large Estates.

What is probate?

In England and Wales, probate is the process of applying for the right to deal with a deceased person’s property, money and other possessions – known as their ‘Estate’.

If a person has left a Will, they will usually have appointed an Executor. This Executor then has to apply for a ‘Grant of Probate’ from the Probate Registry Office.

Around £81 billion of assets is dealt with through probate each year – an average of 270,000 applicants – according to the Ministry of Justice.

But not all Estates need to go through probate. The Ministry of Justice says only around 50% of deaths lead to an application for a Grant of Probate.

This could be because the bank is willing to release the deceased’s funds without probate, because assets are jointly owned – a house for example could be transferred to the remaining spouse without the need for probate, or because the value of the assets are below £5,000.

If a person dies without making a Will, the Law of Intestacy applies.

How much does probate cost?

At present, applications for Grants of Probate are set at £155 when sought by a Solicitor, and £215 when sought by an individual.

The Government says this higher fee for personal applicants reflects some of the additional administrative work that must be done by the Probate Service.

However, individuals making probate claims are guaranteed to be reimbursed from the deceased’s estate – so they won’t be left out of pocket.

Individuals applying for probate for Estates worth less than £5,000 do not have to pay a fee.

How much would probate cost under the Government’s proposed plans?

The Government’s proposals would see the cost of probate increase in accordance with the value of the Estate:

Value of Estate (Before IHT) Proposed Fee
Up to £50,000 £0
£50,000 – £299,999 £300
£300,000 – £499,999 £1,000
£500,000 – £1 million £4,000
£1 million – £1.6 million £8,000
£1.6 million – £2 million £12,000
Over £2 million £20,000

Where does the proposal stand at present?

The proposal was widely denounced by solicitors who claimed that the fees amounted to a ‘stealth tax’. Solicitors recently told the Law Gazette that the increased fees could potentially be very damaging to law firms. The fees are often covered upfront by law firms who later recoup the fee from the estate, but many law firms would be reluctant or unable to cover a fee of up to £20,000.

A parliamentary committee that considers statutory instruments questioned the legal basis of the fees, suggesting that the lord chancellor could be acting ultra vires. As Jacob Rees-Mogg MP succinctly put it in a parliamentary debate on the budget. “Probate charges should relate to the cost of the probate work, which is broadly irrelevant to the size of the estate.”

Parliament was dissolved on the 3rd of May before the overhaul could be approved by both houses. The Guardian wrote in April “Political sources suggested that the level of opposition to the fee increases – in effect a wealth tax – is too great for it to be reintroduced after the election.”

There has certainly been no mention of the changes being re-introduced since the re-election of the Conservative party in June. The scheme itself was authorised by then Secretary of State for Environment, Food and Rural Affairs Elizabeth Truss MP, a role now held by Michael Gove MP, who appears to have more pressing demands on his working hours. There was also no mention of the reforms in the Autumn 2017 budget.

However, as The Guardian points out, the scheme was due to raise funds for improving the judiciary system and “If dumped, another source of revenue may be required by the MoJ to replace the projected £300m income the changes would have raised.” They went on to say “Compared with her predecessors, Truss has been successful in securing new funds from the Treasury, but finance ministers may resist covering such a large shortfall solely from central funds.”

Leave a reply

You must be logged in to post a comment.

Enjoy this article? Why not share it with your family, friends, and followers?