The Government has confirmed its plans to change the probate fees payable
For an application for a grant of probate. The new rates come into effect in May 2017 and range between £300 and £20,000, depending on the value of the estate. The structure of the fees is such that the Treasury expects the ONS to classify them as a tax in the National Accounts. The Government expects the new fee structure to raise around £300 million a year. The government has lowered its inheritance tax forecast by around £30 million a year to reflect the incentive for individuals with estates valued close to the bottom of the thresholds in the new probate fee structure to reduce the value of their estates (through genuine or contrived means) to remain within a lower fee band. This effect is expected to be relatively small, since the inheritance tax liability itself already provides a significant incentive to do this.
How much will my estate pay?
The Government states that estates below £50,000 will pay nothing at all – this applies to 58% of all estates in England and Wales.
But all estates worth more than £50,000 will be forced to pay increased fees. Those between £50,000 and £300,000 will pay £300; estates worth over £1m but less than £1.6m will pay £8,000; and those above £2m, £20,000 – a 9,000% increase (see table, below).
|Value of estate before inheritance tax||Proportion of all estates in England & Wales||Proposed fee|
|Up to and including £50,000||58%||£0|
|£300,00 – £500,000||11%||£1,000|
|£500,000 – £1million||6%||£4,000|
|£1milliom – £1.6million||1%||£8,000|
|£1.6million – £2million||0.3%||£12,000|
|£2million and above||0.5%||£20,000|
Under the plans the Government states that no estate will pay a fee that is more than 1pc of its value. It said 92p% of estates would pay £1,000 or less, 98% would pay £4,000 or less and fewer than 2% of estates would pay £8,000 to £20,000.
Brief overview of Inheritance Tax
Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who has died.
Normally no Inheritance Tax is payable if either:
• the value of the estate is below the £325,000 threshold
• Everything is left to a spouse or civil partner, a charity or a community amateur sports club
If the deceased is married or in a civil partnership and the estate is worth less than £325,000, any unused threshold can be added to the partner’s threshold. This means their threshold can be as much as £650,000.
The standard Inheritance Tax rate is 40%. It is only charged on the part of the estate that is above the £325,000 threshold.
Reliefs and exemptions
Some gifts given during one’s life may be taxed after your death. Depending on when the gift was given ‘taper relief’ might mean the Inheritance Tax charged is less than 40%.
Other reliefs, such as Business Relief, allow some assets to be passed on free of Inheritance Tax or with a reduced bill.
Please contact the Inheritance Tax and probate helpline about Agricultural Relief if your estate includes a farm or woodland.