Inheritance tax receipts soar…

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…as the Government announces new death tax

The Government recently announced that inheritance tax receipts had hit a record high of £5.2 billion in the last financial year and are now considering a further ‘death tax’ by raising the Probate Court Fees (to obtain a Grant of Probate) from £155 with a solicitor or £215 if in person to £6,000 (for an estate worth over £2m). This increase will happen in April 2019.

A Grant of Probate is obtained when an executor or administrator applies to the court to be given the authority to deal with the deceased person’s assets so they can administer the estate (property, money and belongings).

The new fees are much lower than those announced in 2017 when the Government were considering fees of £20,000 to obtain a Grant of Probate on an estate worth over £2million.

The new fees will be staggered as follows:

Value of Estate

New Fee

£50,000 – £300,000 £250
£300,001 – £500,000 £750
£500,001 – £1m £2,500
Above £1m – £1.6m £4,000
Above £1.6m – £2m £5,000
Above £2m £6,000

Estates where the value is less than £50,000 will be exempt from the fee. However, it is worth noting that some banks or building societies will let beneficiaries withdraw up to £50,000 without a Grant of Probate.

Due to many bank accounts being frozen when probate is commenced, the new fee could cause a problem with the management of an estate. Without banks agreeing to pay these fees from frozen accounts, the Executors will have to raise the funds either through a loan or from their own accounts whilst grieving for their lost loved one. The Ministry of Justice has stated that the fees will only be paid by those who can afford them and that the monies will go directly into the Courts and Tribunals services. This means that the Court system would be partly funded by those who only use the Court service to apply for a Grant of Probate. Despite assurances that fees will never be more than 0.5 per cent of the value of the estate, this could still see those inheriting a large estate being hit with “extortionate fees”.

A significant number of estates could fall into the top band due to historically high property values and a tax free allowance which has been frozen at £325,000 since 2009.There is a further allowance called the Residential Nil Rate Band (currently £125,000), however, this is only available to those who have a property and children. The effect of this can be seen in the 2017-2018 inheritance tax receipts which hit a record high of £5.2bn.

Evidently, the rising value of assets will continue to impact those going through an emotional and challenging time. However, with careful planning trusts can be used to lower the value of an estate and ensure that inheritance tax payable is kept to a minimum.

For further information on how we can help you with managing an estate, a Will or a trust please contact our Wills Trusts and Probate team on 01733 882800 or email [email protected].

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