Bereaved families will face soaring probate fees from April 2019 under new plans revealed by the Ministry of Justice.
Reforms to probate fees have been the subject of consultation since 2016 and a year later the first proposals, which included a charge of £20,000 for estates worth £2 million or more, were met with outcry. However, with the snap election in June 2017, the Ministry of Justice announced that the necessary statutory instrument which would allow the law to be changed could not be completed in time and the plans were shelved.
Now, the Government has returned to its plans to raise revenue through probate applications with some sharp rises on the cards, although the increases are not as harsh as those proposed previously.
Currently an individual applying for probate in England and Wales will pay £215 in fees, or £155 if a solicitor is used. Where an estate is worth less than £5,000, no fees are payable.
Under the new regime, the fee will no longer be fixed and will instead vary depending on the value of the Deceased’s estate. Whilst estates worth less than £50,000 will not have to pay a fee, larger estates worth £2 million or more will be charged £6,000.
The new fees are as follows:
|Value of estate||Fee from April 2019||Increase on current fee*||Old 2017 proposals|
|Less than £50,000||£0||Estates worth £5,000 – £49,999 make a saving of £215||£0|
|£50,000 up to £300,000||£250||£35||£300|
|£300,000 up to £500,000||£750||£535||£1,000|
|£500,000 up to £1 million||£2,500||£2,285||£4,000|
|£1 million up to £1.6 million||£4,000||£3,785||£8,000|
|£1.6 million up to £2 million||£5,000||£4,785||£12,000|
|£2 million or more||£6,000||£5.785||£20,000|
* The above table compares the new fee to the current fee of £215 – however, as noted above, this is reduced to £155 if a solicitor makes the application.
The increases have been introduced despite substantial concerns raised during the consultation process. These included that the fees should not exceed the cost of delivering the service and should not be linked to the value of the estate; otherwise, the fees would be excessive and a form of taxation. However, the government has said that the rise is needed to cover the costs of the court service. It plans to raise an extra £145m in 2019-20 through the increases in comparison with the £49m that was collecting from probate services in 2016/17.
The Government has capped the fees at 0.5% of the estate value which means that estates worth £500,000 come off worst, with the £2,500 fee equating to the highest possible percentage.
Around half the estates in England and Wales currently pay probate fees and around 260,000 grants were issued in 2017. The Government anticipates that 80 per cent of estates will pay £750 or less in fees, although for some this will still represent almost five times the current fee if a solicitor is used. With the lower limit raised from £5,000 to £50,000, it estimates that 25,000 estates will pay no fees at all. However, those with estates of £2 million or more will see an increase of almost 38 times the current fee.
Criticism of reforms
After the 2017 proposals were made, the House of Lords Secondary Legislation Scrutiny Committee in its 28th Report of 2016/17, drew the draft Order to the special attention of the House, on the ground that it gave rise to issues of public policy likely to be of interest. The report states:
“… those paying £1,000 will be paying approximately 400% above the actual cost of the service. This is contrary to standard practice. In the guidance to government departments, Managing Public Money, 3 paragraph 6.3.6 states: “different groups of customers should not be charged different amounts for a service costing the same, eg charging firms more than individuals. Similarly, cross subsidies are not standard practice, eg charging large businesses more than small ones where the cost of supply is the same”.” (Twenty Eighth Report)
The guidance on Managing Public Money referred to in the report can be found here (page 43).
The report notes that the Ministry of Justice has power under Section 180(1) of the Anti-social Behaviour, Crime and Policing Act 2014 to “prescribe a fee of an amount which is intended to exceed the cost of anything in respect of which the fee is charged” but it then questions whether the House envisaged that power being used to this degree. It goes on to state
“To charge a fee so far above the actual cost of the service arguably amounts to a “stealth tax” and, therefore, a misuse of the fee-levying power.”
The House of Commons briefing paper provides more information and background on the Consideration of the 2017 draft Order by the Committees, together with full details of the revised proposals.
Mitigating the increase in fees
With the rising cost of property it is likely many more estates will be subject to fees at the higher end of the scale. Where much of the estate’s value is tied up in property, the rise in fees could cause significant financial hardship.
There has never been a better time to sit down with a solicitor and consider the range of estate planning options that are available. For example, a life insurance policy can be set up to cover probate and inheritance tax expenses and if this is written in trust, it will be immediately accessible on death without having to wait for probate. Speak to our Later Life Planning team to find out more.
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