Surprise increase in Probate fees
The 2017 spring budget has a sting in the tail which many people won’t feel until they are dealing with the death of a loved one. In what is being called a £300m stealth tax, probate fees once previously capped at £215 or £155 if the application was made through a solicitor are now going to be applied on a sliding scale depending on the value of the estate.
Estates worth under £50,000 will be exempt whilst those worth more than £2 million could pay as much as £20,000. The new fees will be introduced in May 2017 and will be due in addition to any Inheritance Tax currently levied at 40% of an individual’s assets above the £325,000 personal threshold.
|
Value of the estate (before inheritance tax) |
Proportion of all estates in England & Wales |
Proposed fee |
|
Up to £50,000 or exempt from requiring a grant of probate |
58% |
£0 |
|
£50,000-£300,000 |
23% |
£300 |
|
£300-£500,000 |
11% |
£1,000 |
|
£500,000-£1million |
6% |
£4,000 |
|
£1m - £1.6m |
1% |
£8,0000 |
|
£1.6m - £2m |
0.3% |
£12,000 |
|
Above £2m |
0.5% |
£20,000 |
These changes come in at a time when many people will now be taken out of the Inheritance Tax threshold due to the new residence nil rate band, which comes into force on 5 April 2017. From April, each individual can claim an additional allowance of £100,000 to offset the sale of a family home on death on top of their existing £325,000 inheritance tax exemption. By 2020 this will rise to £175,000 allowing a couple to pass on £1 million estates tax free.
These new rules need careful reading as this new allowance is only available if the property has been the person’s main residence at some point and is being inherited by children stepchildren, adopted children or grandchildren. The new rate will not apply if property is left to nieces or nephews or brothers or sisters. It is also not available if the property is being left in Trust.
Estates worth more than £2 million will see a ‘claw back’ on this Inheritance Tax relief losing £1 of the allowance for every £2 in extra wealth. Business owners are also likely take an extra hit because of this new rate.
For many people here in the South East, rises in property and land values will now push many estates into these higher tax bands for probate fees and their overall estate beyond the new £1 million threshold.
I suspect there are many people who will have Wills which are of date and specialist advice should be sought on the best way to plan for these new rates.
The old saying of the only two things in life of which we can all be certain – death and paying taxes, now seem to have taken a step closer together which many people will find very frustrating.
Alex Astley can be contacted at [email protected] or call 01622 689700.