Death taxes

The government is proposing an increase in probate fees on larger estates.  The fee proposals will realise much higher revenue than is currently being generated.

If the value of an estate is more than £5000, then you need to obtain an official grant of probate before you can distribute the estate. Currently this now costs either £155, if you use a solicitor, or £215 if you do it yourself.

The proposed new fee structure will be based on the size of the estate; nothing if it’s under £50,000, but as much as £20,000 if it’s above £2m. Some will pay less, although the government admits that this will provide around £250m, which is “vital” in the battle to cut the deficit.

Inevitably, this flat tax burden will fall on people who happen to live in London and the south-east, where property prices have been most buoyant.

Apparently the government reckons the fee for a basic government service should be based on the individual’s wealth, rather than what it actually costs to provide that service. If that is the case, then there is already a mechanism in place for providing revenue, it is called Inheritance Tax.

We will have an absurd situation of not increasing Inheritance Tax as part and parcel of Conservative policy but significantly increasing probate document fees to much higher levels.

So while it’s being presented as a new death tax, you could also argue that it’s an indirect form of property tax. It is quite possible that an otherwise relatively modest estate that includes a family home could trigger probate fees of up to £9000. That amount should be added to the Inheritance tax levied on the estate in order to calculate the total costs associated with death.

These changes serve as a reminder that this government is looking for as many opportunities as it can, so expect further stealth tax increases along similar lines.

Inheritance Tax (without the recent largesse granted to large property owners) is a relatively fair tax. It is supposed to be a tax on the wealthy.  It is however a tax on the unwary – (regardless of wealth) on those who can’t be bothered to seek out and pay for high quality advice. That’s because there is considerable scope for reducing the impact of Inheritance Tax on estates – providing prior planning is carried out with an experienced and capable adviser.