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A probate tax is coming – here’s what you need to know
The big tax news in the Budget on Wednesday was the national insurance rise for self-employed workers. While this continues to cause a storm in the headlines, another change which was confirmed by the Government this week has all but slipped by – changes to probate fees.
Probate fees are currently set at a flat £155 if you use a solicitor (or £215 for DIY probate). This will change to the new sliding scale from May 2017, effectively making it a new inheritance tax (something the government acknowledges).
The good news, of course, is that estates under £50,000 will no longer incur probate fees. You’ll pay your solicitor’s costs for handling the probate and the rest will go to the beneficiaries. Over half of estates nationwide will be administered this way as they don’t meet the £50,000 threshhold.
Above £50,000 the new sliding scale kicks in and the following rates apply:
|Estate value||New fees|
|£50,001 – £300,000||£300|
|£300,001 – £500,000||£1,000|
|£500,001 – £1,000,000||£4,000|
|£1,000,001 – £1,600,000||£8,000|
|£1,600,001 – £2,000,000||£12,000|
|£2,000,001 or more||£20,000|
So, for our clients whose estates are worth between £50,001 and £300,000 the increase will be £145. For them it will be an unwelcome hike, but in the context of the whole estate it should be affordable.
However, the subsequent rate increases represent a huge hike in probate fees – effectively creating a probate tax where once there was just an administration fee. We expect that clients who have assets which will place the estate close to a particular threshold will want advice on making sure their beneficiaries don’t get hit with extra probate fees.
Unfortunately, as far as we know the government hasn’t announced whether the boundaries will move up with inflation. If they don’t, then the 58% of estates which are currently exempt from the fees could quickly find themselves creeping into the £300 band.
What’s more, any tax planning for estates of higher value could also be affected by inflation and house price increases. Therefore it’s going to be really important going forward that you take the time to regularly review your affairs, your Will and any gifts you give your children or partner while you’re alive.
If your estate is even just one pound over the next threshold, they could be faced with a bill for thousands.
Our Wills, Trusts and Probate solicitors in Bristol are experienced in advising clients on probate and related issues. For more information about estate administration, or to speak to a solicitor about planning your affairs, call us on 0117 325 2929 or complete our online contact form.