Probate Fee Changes – The Legal Aspect
The Government has recently announced plans to introduce a new fee structure for Probate fees. These changes are due to take effect from April 2019, although an exact date is yet to be confirmed pending approval from MPs.
For estates valued at over £5,000 in England and Wales, there is a flat rate fee of £155 (where a solicitor is instructed to apply for the Grant of Representation), or £215 (where an applicant applies in person). It is proposed that Probate fees will now be based on a ‘banded fee’ approach, depending on the value of an estate. The Government believes that this is a ‘fair and more progressive way to pay for Probate services’.
The fees will now depend on the amount the estate is worth:
- Estates worth less than £50,000 will pay nothing, meaning estates worth between £5,000 and £50,000 will save £215 compared to the current system.
- Estates worth £50,000 up to £300,000 will pay £250, a rise of £35.
- Estates worth £300,000 up to £500,000 will pay £750, a rise of £535.
- Estates worth £500,000 up to £1 million will pay £2,500, a rise of £2,285.
- Estates worth £1 million up to £1.6 million will pay £4,000, a rise of £3,785.
- Estates worth £1.6 million up to £2 million will pay £5,000, a rise of £4,785.
- Estates worth more than £2 million will pay £6,000, a rise of £5,785.
One positive result of the proposed changes is that for estates valued at less than £50,000, there will not be any fee payable. A significant number of estates however will exceed this threshold, and this will undoubtedly mean that an increase in fees will affect a lot of people.
There is currently an attempt to rush through Probate applications to benefit from the current fee system, however if Inheritance Tax is payable on an estate, it is extremely unlikely that the increased fees can be avoided due to inescapable involvement from HMRC which can delay applications by several weeks. If, however, an estate is not liable for Inheritance Tax, we would recommend proceeding with your application as soon as possible.
Probate Fee Changes – The Financial Aspect
One potential impact of the change to the Probate fees is that investors in schemes that qualify for Business Property Relief (BPR) will also see a hike. BPR schemes are often used as a way of reducing an inheritance tax liability because, after 2 years the value of the investments attracts a relief from Inheritance Tax (IHT) called Business Property Relief. The advantage is that the investments will not be taxed but remain in the estate in case they are required in the future. Under the current Probate fees system, there was no impact of holding the investments within the estate.
The new probate fees calculation does not distinguish between assets that are subject to IHT and those that are not. So, holding BPR qualifying investments may reduce the IHT liability but could still result in a substantial hike in Probate fees.
Where investors hold these kinds of investments, it may be possible to consider methods to benefit from the IHT saving but get the value of the investment out of the estate, thereby reducing the Probate fees that would be attracted.
This change to the way that Probate fees are calculated should be a time to review whether your current strategy remains the best course of action.
Should you have any questions for our Legal Experts or Chartered Financial Planners regarding the upcoming rise in Probate fees, or any private client matters including Wills, administration of estates, Lasting Powers of Attorney, Court of Protection applications or the financial aspects, please contact your local branch of WBW Solicitors for advice.
Please note that The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts. The value of investments can fall as well as rise. You may not get back what you invest.
Rates of tax, tax benefits and allowances are based on current legislation and HMRC practice. These may change from time to time and are not guaranteed. In this case, the IHT relief available on this investment may be lost. These will all be discussed as part of the advice process.