'Death tax' scrapes through committee

11/02/2019 News Team

The UK government’s plans to increase probate fees to as much as £6,000 have been approved narrowly following a committee hearing last week (7 February 2019).

The Fourteenth Delegated Legislation Committee voted by nine votes to eight to approve a statutory instrument (SI) applying a scale of charges based on the value of estates rather than the current £215 (or £155 for those using a solicitor) flat fee.

This will now go before the House of Commons where it will be passed unless there’s a majority of objections. The changes would come into force in April this year.

This “death tax” has already been slammed by industry experts.

The Ministry of Justice has indicated that the estimated £300 million of additional income per year will be used to fund the courts and tribunal service, whcih means "the bereaved will effectively be subsidising other parts of the courts and tribunals service, even though they have no other option but to use the probate service," says  Stuart Adams, associate in the private tax and wealth planning team at Mishcon de Reya.


He continued: "The Law Society’s assessment of the proposal is that it amounts to a stealth tax and a misuse of the Lord Chancellor’s fee-levying power – a position that is shared by the Secondary Legislation Scrutiny Committee, the Joint Committee on Statutory Instruments, and the House of Lords."

Sarah Mannooch, a solicitor specialising in wills and probate at Kreston Reeves, believes that “these new fees might mistakenly discourage the use of Wills, as some people still believe they can escape probate fees if they do not have one, and see an increase in assets pass through unconventional or unstructured legacies.”

She added: “It is also concerning that these increased probate fees will need to paid up front.  We would hope that banks would release some assets early to meet these fees but that is not guaranteed.  It is possible that we will see specialist lenders or products appear, possibly with high rates of interest, adding further pressure at a difficult time.”

Edward Vidnes, a partner in the private client team at law firm Royds Withy King, echoes these concerns, saying “It is very difficult to obtain loans to fund the costs associated with the administration of an estate, and it is easy to see lenders taking advantage of this with high interest rates.” 

“We also have significant concerns around people being encouraged to place their properties in trust during their lives to avoid such fees without fully understanding or being properly advised of the consequences. These might include a loss of control once their home is placed in the hands of others and if they continue to live there, the impact this might have on their estate’s future inheritance tax liability. Individuals should always take professional advice before taking such a step.”

Mr Vidnes concluded: “This does have the appearance of a stealth tax given that no greater amount of work is required by the Probate Court as the size of the estate increases."

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