New ‘Death Tax’ – act quickly to avoid a possible £6,000 fee
As reported by us in November last year, a rise in probate application fees has been proposed. Now it seems likely that the government will be introducing the rise in the coming weeks or months (the exact date is yet to be confirmed).
By way of a re-cap, in order to apply for a grant of probate or grant of letters of administration after someone dies, the probate application fee is currently £155 if making the application through a solicitor or £215 if making the application personally.
The proposed increases will introduce a new staged fee structure depending on the value of the estate, with estates worth over £2 million being charged a fee of £6,000. Many are calling this another form of tax rather than a fee, with the £6,000 fee at the top end of the scale being more than 3870% higher than the current fee.
As a result of this and in an attempt to avoid the price increase, it is reported that probate registries are currently inundated with applications as executors and personal representatives desperately put in applications ahead of the change. There had been concerns however that even this opportunity might be closed owing to HMRC’s backlog in confirming its receipt of inheritance tax returns. It has now been confirmed that, as long as the application is submitted prior to the fee increase coming into force, the current fee will be payable even if the grant cannot be issued until later because of an HMRC delay.
In most cases, a grant must be obtained in order to access and close the deceased’s bank accounts and investments, sell a property and administer an estate. The probate application fee must be paid up front, before a grant is issued. This means that, because of the increase, many personal representatives will face problems in accessing funds to pay for the fee.
It is assumed that banks will be willing to release funds to pay the probate fee directly to the probate registry, although this is yet to be confirmed. For those who are administering estates of high value where there is little cash available, it appears that bridging loans will need to be considered or a limited grant will need to be applied for. A limited grant may enable the sale of a property or liquidation of an investment portfolio to raise the cash for the probate fee for the full grant. This extra work adds complexity and time and, as a consequence, it is likely that legal fees will also need to be increased.
The Law Society, who strongly oppose the increase in fees, have suggested that those who also disagree with the proposed fee increase should write to their MP. If you would like to raise this with your MP, the Law Society have created a tool which makes this easy to do at: https://lawsociety.e-activist.com/page/37869/action/1.
If you have any questions or concerns about the probate fee increase please contact Olivia Llewellyn in our Wealth and Estate Planning team on 020 7288 4794 or email at OliviaLlewellyn@boltburdon.co.uk.
You can also contact one of our other solicitors in the Wealth Planning team here.