Hike in probate fees set to go ahead despite opposition

Probate fees are set to be hiked up to £6,000 for the largest estates as the government plans to overhaul the death tax from April 2019, a measure delayed from 2017 due to the early general election

The plans to increase probate fees from the current £155 for grant applications made by solicitors and a charge of £215 for those made by individuals for estates valued at over £5,000 were first announced in February 2017 and were consulted on at the time. The snap general election in June 2017 saw the measure temporarily shelved.

Initial proposals called for a rise in probate fees to £20,000 fee on the largest estates, with an entry level £250 fee, with a higher entry threshold of £50,000.

The fee hikes will see an increase of up to 28 times for some estates, while the fees have no bearing on the actual cost of the service provided. The services involved in a grant of probate are fundamentally the same, regardless of the value of the estate.

The government expects to raise an estimated £145m a year from 2019/20 once the higher fees come into effect.

There was vociferous opposition to the excessive hike in fees during the consultation period, which saw the government water down the original proposals. But there will still be significant hikes in probate fees from 1 April.

The parliamentary under-secretary of state for justice Lucy Frazer set out the plans for the draft Non-Contentious Probate (Fees) Order 2018 to committee members on 7 February.

The measure will not be debated in the house, the Minister confirmed, stating that it had been through committee stage and would be put into statute via a statutory instrument, which does not require a full parliamentary debate.

As it is described as an ‘enhanced fee’, not a tax, it falls outside the tax rules which require debate.

'We have the power to pass the legislation by way of statutory instrument, and that is how we are doing so,’ said Frazer.

The minister told MPs: ‘The purpose of the draft order is to implement a new, more progressive banded structure of fees for the grant of representation, commonly known as a grant of probate, which will come into force in April. The banded fees relate to the value of the estate.

‘The new structure is different. It is a banded, fairer structure for probate fees and it no longer applies a flat fee.

‘The threshold at which the new fees become payable will be raised from £5,000 to £50,000. That will exempt approximately 25,000 additional estates per year from paying fees altogether.

‘Overall, more than half of estates will pay nothing, because they are either exempt or do not require a grant of probate. Of those that do pay, around 60% will pay fees of £250, which is comparable to the current fee for individual applications. Moreover, the new model means that revised fees will never amount to more than 0.5% of the value of the estate.’

Frazer acknowledged that the initial fee structure had been heavily criticised, stating: ‘The top band has now been reduced from £20,000 under the previous proposal to £6,000 under this order. The new banded fees structure does not amend the underlying ​policy rationale and will retain the same progressive banded structure as the earlier proposal, in which the fee payable relates to the value of the estate.’

MPs raised concerns from the charity sector about the impact of the higher probate fees on legacies.

‘When a charity such as Cancer Research UK fears that the changes could cost it £600m per year, it highlights the real concerns of organisations in the voluntary sector,’ said Susan Elan Jones, MP for Clwyd South), asking the MP for clarity on the impact of the measures on the charity sector.

Frazer said that ‘the order will not affect the amount paid out to charities when there is a fixed request rather than a percentage’, but did not respond to the concerns of the Office for Civil Society about the increased costs for charities.

Commenting on the proposed changes, Kay Ingram, LEBC director of public policy, said: ‘This increase cannot be justified as the size of the estate has no bearing whatsoever on the work involved. 

‘This proposed leap in fees will make it impossible for some families to access their loved ones’ assets without getting into debt and will add unnecessary stress at a time of considerable vulnerability.

‘The CMA [Competition and Markets Authority] has shone a light on poor treatment of the bereaved in the field of funeral services and care homes.  If, as the Ministry of Justice argues, that this increase is not a tax increase, but a fee, then it deserves the same scrutiny as exploitative pricing by business.’  She added: ‘If it is a tax increase then MPs must account to their constituents for this.’

The fees are set to come into effect from 1 April 2019.

The current flat rate system will be replaced with a banded pricing structure linked to the value of the estate (before inheritance tax (IHT)), and the same rate applies regardless of whether the applicant is a solicitor or an individual.

Value of estate (before inheritance tax)

Proposed fee

Up to £50,000 or exempt from requiring a grant of probate

£0

£50,000 - £300,000

£250

£300,000 - £500,000

£750

£500,000 - £1m

£2,500

£1m - £1.6m

£4,000

£1.6m - £2m

£5,000

Above £2m

£6,000

 

 

The fees will raise £145m per annum from 2019/20, rising to £185m in 2022/23, and will be ringfenced to fund the courts and tribunal service. In 2016/17, the courts service cost £1.6bn in running costs but recovered less than half of that in fees (£740m).

Report by Sara White

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