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Return of the England and Wales probate fee tax

Thursday, 8 November, 2018

The government has resurrected its 2017 plan for an enormous increase in probate application fees for higher-value estates in England and Wales.

The new version imposes slightly less punitive charges than its previous incarnation, which was introduced in February 2017 and dropped when the general election was announced in May 2017.

However, it will still replace the current GBP215 flat fee with charges based on the value of the estate, to a maximum GBP6,000 for estates worth more than GBP2 million. Fees will be GBP2,500 for estates between GBP500,000 and GBP1 million; GBP4,000 for those between GBP1 million and GBP1.6 million; and GBP5,000 for estates between GBP1.6 million and GBP2 million.

Junior Justice Minister Lucy Frazer said the fees were necessary in order to fund the current comprehensive reform of the courts and tribunals system. She also pointed out that the new banded fee system's increased estate value threshold of GBP50,000 will take 25,000 estates out of the fee system each year and, of those who do pay, 80 per cent will pay GBP750, a 249 per cent increase: the fee for estates valued at between GBP300,000 and GBP500,000.

Executors will be given several options to fund the fee from the estate, Frazer said, and a guidance document, Guidance on Ways to Pay for Probate Fees, will be published before the new rules come into force.

However, the new charges bear no relation to the actual cost of providing the service. Last year, the House of Commons Joint Committee on Statutory Instruments warned that this might make the then-proposed new fee structure unlawful, but that legislation was dropped before the matter could be resolved. The government insists it is acting within its powers, but STEP has obtained a legal opinion which confirms that, given the tax nature of this measure, this is an abuse of the parliamentary process.

George Hodgson, STEP CEO, said of the new charges that they ‘bear no relation to the cost of probate, and are simply another form of taxation, sneaked in through the back door.’

Nick Rucker, of law firm Irwin Mitchell, warned that the new fee scale could tempt people to try and pass their estates on without grant of probate, possibly with repercussions for inheritance tax receipts.

James Ward TEP, of law firm Kingsley Napley, said there was a risk that people could move away from using wills and instead pass on their estates through lifetime gifts or the survivorship rules of joint property and bank accounts, under which property is automatically passed on death and the value is not included in the value of the estate at the grant application stage. 'It is very effective in some cases but can lead to inequality between children and a misunderstanding as to who gets what and not fulfil the deceased's wishes', he said.

STEP understands that it is currently planned to introduce the new probate fees in April 2019.