STEP Article – UK government confirms probate fees increase for high-value estates

Please enjoy this informative article from STEP

“The UK government has officially confirmed that probate fees in England and Wales will change in May 2017 to a banded system, where fees increase with the value of the estate, replacing the current flat fees.

No fee will be payable for estates worth less than GBP50,000, but the charges will increase rapidly beyond that threshold, rising to a maximum of GBP20,000 for estates above GBP2 million. Moreover, probate applications will be excluded from the fee remissions scheme for individuals who cannot afford them.

The cost of probate fees increased sharply in April 2014, when the cost of an application through a solicitor rose from GBP45 to GBP155, and the cost of a personal application increased to GBP215.

The proposal to link probate fees to the value of the estate was published in February 2016 and attracted overwhelming opposition, especially in view of the government’s subsequent admission to parliament that the Probate Registry was already self-funding on the existing fee structure.

According to the Ministry of Justice’s consultation response, only 63 out of 829 respondents agreed with linking probate fees to the value of the estate, and 695 disagreed. Most reponses to the consultation considered that the proposed fees were too high, and, because they would be set above cost recovery levels, would effectively constitute a form of taxation.

In its response to the government consultation, STEP expressed concern at the proposals. Now that the changes have been confirmed, STEP Chief Executive George Hodgson said: ‘STEP is very disappointed that the Ministry of Justice has decided to ignore the view of both STEP and the overwhelming majority of respondents to this consultation and press ahead with what represents a new tax on bereaved families.’

Lawyers from Irwin Mitchell Private Wealth said the new charges will hit cash-poor property owners, especially rural families with small farms. Individual beneficiaries who are asset-rich but cash-poor would be badly affected by the need to raise such considerable sums to obtain probate, said Sarah Phillips TEP at law firm Irwin Mitchell. ‘Many will have no alternative but to go to the expense of a bank loan to pay the fee. Unless the house is being sold, it then leaves a problem as to how the loan is repaid.’

Moreover, said Phillips, older people may be pressured by families to give away assets in their lifetime to avoid these high charges. ‘The risk is of many older people living in houses now owned by children who don’t always act in the best interests of their parents’, she said. ‘Rural families with small farms could be badly affected as the relatively high value of farmland often goes with limited income. Even if a working farm benefited from 100 per cent agricultural property relief from inheritance tax, so that no actual tax was payable, this backdoor tax would still have to be found.’

‘Court fees are never popular but they are necessary if we are as a nation to live within our means’, commented the Ministry of Justice. ‘These proposals would raise around an additional GBP250 million a year, which is a critical contribution to cutting the deficit and reducing the burden on the taxpayer of running the courts and tribunals.’ – “