Posted by Carla Keen, Associate
Probate fees set to increase in April 2019 to fund courts service
The Government has announced plans to introduce a new fee structure for probate fees. This will see estates valued at more than £2m pay a fee of £6,000, a rise of 3,771% on current charges. This increase has been controversial in many ways not least the view that the charges have gone from being an administrative charge for a service to a ‘stealth tax’ that subsidises other areas of the courts system.
Currently all estates pay a fee of £155 (where a solicitor is used to apply for the grant of representation) or £215 (where an applicant applies in person).
The full proposed fee scale is detailed in the table below:
The Justice Minister, Lucy Frazer, said that the proposed reforms are essential to provide an effective modern courts and tribunals service, and the revised fees ensure that no estate will pay a fee of more than 0.5% of the value of the estate. Around 80% of estates will pay £750 or less. However it’s those in the middle with estates valued at £500,000 who will be paying the highest percentage of fees on their estate at 0.5%, not those at the upper end of the scale.
As part of the reforms, applicants can apply for the grant of representation online. They will be provided with access to digital support which the Government says is designed to enable people to apply for the grant of representation without the need for a solicitor which will provide a simpler and more efficient application process. However the court is unlikely to provide the legal assistance needed to deal with the many other aspects of administering a loved one’s estate so many will turn to a solicitor for advice anyway.
Funding the application may prove to be a real issue. The burden for paying the probate court fee falls on primarily on the executors along with the payment of any inheritance tax and the funeral. If the estate has insufficient cash assets to pay for these before the grant of representation has been issued, then the executors may have to pay for these themselves upfront. In estates with little cash, but a high value property, the executors may be forced to pay the several thousand pounds court fee themselves and will only be reimbursed when the property is sold, which can be several months later. The alternative could be obtaining loans to cover the cost. The Ministry of Justice has said it will publish “guidance on ways to pay” so we will have to wait to see what their proposed solutions are.
This fee increase has been dubbed by a House of Lords committee as ‘stealth tax’. Given that the value of assets usually doesn’t mean that any more work is involved in the application, particularly for the court issuing the grant of representation, this new fee structure appears no more than an additional tax levied on estates. Their report this November said, “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.” They also highlight standard guidance given to Government departments which advises that that “different groups of customers should not be charged different amounts for a service costing the same.”
The Law Society adds, “It is unfair and discriminatory to expect the bereaved to subsidise other parts of the courts and tribunal services.”
If these reforms go through, the result may be that in addition to inheritance tax planning and care fees planning, probate fees will also need planning for and will become a priority when drafting Wills and discussing estate planning requirements.
The Government hopes to put these reforms in place by April 2019 but they have yet to go through Parliament. It’s been reported that several legal bodies are preparing to lobby the Government on this topic so we shall have to wait and see whether this, along with potential reforms to inheritance tax rules, will make ‘death taxes’ a big topic for Spring 2019.
For further information on applying for probate or advise on your role as an executor of a Will contact our Private Client team on:
0800 923 2070 Email us