April 2017 update
After the surprise announcement of the general election in June, the proposed probate fee rise has been scrapped - or possibly postponed - as it was felt there was not enough time for the legislation to go through Parliament.
At the time of writing, the Conservatives are remaining tight-lipped as to whether the probate fee rise will be revisited should they win the election.
What follows is an unedited account of the changes as they were due to happen prior to this announcment.
The fee to get court approval for the distribution of their property, money, and possessions – called probate – will rise in May. The current flat rate in England and Wales of £215 (or £155 through a solicitor) will be as much as £20,000 on some bigger estates. The change does not affect Scotland or Northern Ireland.
For estates that include an average home the fee will rise by 40% to £300. Those with a typical family home in London and the South East could pay as much as £4,000. For estates over £1 million the fee starts at £8,000 and will be as high as £20,000 over £2 million.
Stuart Adams, a senior solicitor in London with Penningtons Manches told Saga Magazine ‘For most in the higher brackets they will already be paying Inheritance Tax and this will feel just like another tax on top.’ The Government admits that this new scale of fees is far more than the actual administrative costs for the court service to deal with probate applications. In fact, it is so much more that the income from it will be classified by the Office for National Statistics as a tax. A death tax. Paid from the estates of around 270,000 people every year.
|Value of estate
||Change from £215
||Number of estates per year
|Up to £5,000 or exempt
|£5,000 to £50,000
|£50,001 to £300,000
||£85 (40%) more
|£300,001 to £500,000
||£785 (365%) more
|£500,001 to £1m
||£3,785 (1760%) more
|£1m to £1.6m
||£7,785 (3621%) more
|£1.6m to £2m
||£11,785 (5481%) more
||£19,785 (9202%) more
Source: cols 1-2 Ministry of Justice; cols 3- 4 Office for National Statistics and Paul Lewis calculations.
What is probate?
Probate is the process of dealing with the property, money, and possessions of someone who has died. You apply to the Probate Registry for what is called a ‘Grant of Representation’ which is normally needed to release the money, investments, and property owned by the deceased.
Many estates do not need to get probate. If there is only jointly owned property and money which passes to a spouse or civil partner, then probate will not normally be needed. However, if the spouses each own a separate share of the property – called ‘tenants in common’ – then probate will be needed. Many estates below £50,000 will not need probate.
But if the deceased owned shares, investments, property, or land in their own name the grant of representation will almost always be needed to release the money or transfer the title of any property. Banks will release cash from accounts up to a limit which they set themselves (often much less than £50,000 though that may now change) without a grant of representation.
Applying for probate and probate explained
Paying probate fees
You apply for probate after the property, possessions, money, investments, and other assets have been identified and valued and any debts paid. The fee to the Probate Registry is due on application. The new higher fees may be difficult for the executors to pay before the money is released from the estate.
Banks and building societies can release money before probate to pay the fees and some will do so. If that is not possible then the executors will have to look to their own assets or ask the people who will benefit from the estate. If that fails then they will have to try to borrow the money to cover the months before the Grant of Representation is made and money can be released to repay it. Stuart Adams warns that the banks are very reluctant to make such loans and that solicitors will be unable or unwilling to do so: ‘Solicitors cannot use their office account as a banking facility. It may even be against our rules.’
Even if the money is borrowed, an estate that consists mainly of the family home may not have enough cash or other assets to repay it. So the family home may have to be sold or mortgaged to do so.
The Government admits some people with a poor credit rating will not be able to get a loan. But it has ruled out a system of remission for people on a low income or in financial hardship. Instead anyone who has tried everything possible but still failed to raise the money for the fees may apply in ‘exceptional’ circumstances for help from the Lord Chancellor.
Why the change in probate fees?
The Government has been clear that the higher fees are designed to raise money to help offset the £1.9 billion a year it spends on the courts service. Fees in other areas contribute about £700 million leaving £1.2 billion as what it calls ‘a burden on the taxpayer’. The current fees already cover the administrative costs but the new higher fees will provide £320 million in additional income each year. The Government says that is “a substantial contribution to the running costs” of the courts. When the Government consulted on the changes last year only 63 out of the 829 who responded fully supported the plans. But it pressed ahead anyway with its new death tax.
Stuart Adams said, ‘most members of the public are completely unaware of this change. The new fees are just too high and the jumps between the bands too sharp.’
Does the probate fee rise apply to Scotland, Wales and Northern Ireland?
The new rules apply in England and Wales to applications for probate made on or after from the starting date this May. In Scotland the fees for what is called confirmation are no more than £500. In Northern Ireland the fee for a grant of probate is £250.
For lots more on probate and what to do when someone dies, visit our inheritance section.
General guidance gov.uk – search ‘probate’.
HMRC Probate and Inheritance Tax helpline 0300 123 1072
||To enjoy Paul Lewis' expert tips on personal finance, consumer
rights, getting the most out of your pension and more delivered straight
to your door each month, subscribe to Saga Magazine today!