Probate fee hike scrapped
Backdoor inheritance tax taken off political agenda prior to general election
The government has scrapped controversial plans to increase probate fees to as much as £20,000, saying there would not be time before the general election on 8 June.
The plans would have replaced the current flat fee of £215 for applications made without the assistance of a solicitor with a sliding scale based on the value of the estate ranging from £300 to a maximum of £20,000 for those worth over £2m.
Law Society president Robert Bourns said: ‘This proposal would have affected 42 per cent of estates and would have put pressure on families when they have just suffered a bereavement so we are glad it is no longer going forward.’
The hike attracted widespread criticism, with warnings that it could put asset-rich but cash-poor families at risk. MPs also savaged the proposals, saying they were an illegal tax by the back door which the Ministry of Justice had no power to decide, while one of the country’s leading insurance firms called it ‘a nice little earner’ for the ministry.
In response to a freedom of information request by Royal London, the government said it did not have data on the average cost of handling a probate application. Policy director Steve Webb said the reply was an admission that the new rates were a simple revenue-raising measure that had nothing to do with recovering the reasonable cost of processing a probate application.
With the government’s focus now on the general election, the MoJ has confirmed this morning that the statutory instrument required to introduce the proposed fees would not be drawn up in time, according to press reports.
The increase was expected to raise £250m towards the funding of the courts service and will leave a gap in the MoJ’s budget. The decision to drop it – at least for the time being – comes after the U-turn on a planned rise in National Insurance contributions last month. The 2 per cent hike in Class 4 contributions would have brought £2bn to the Exchequer.
There remain concerns, however, that an election win for the Conservative party could embolden the government to bring back the proposal.
The Institute of Legacy Management, the membership body for legacy professionals, welcomed the news. ‘Had the proposed changes come into effect next month, as planned, we estimate the income charities receive from legacies would have decreased by £18m per year,’ chief executive Chris Millward said.
‘Our members – along with donors, executors, solicitors, and charities – were overwhelmingly against the proposals. We now seek reassurance from the Ministry of Justice that the proposals are scrapped for good, and not simply put on hold in the lead-up to the general election.’
Rebecca Fisher, a partner at Russell-Cooke, added: ‘Given many had considered this was an inheritance tax by the back door, it is unsurprising this has been taken off the agenda prior to the general election. That said I think it will be highly likely that we will see a rise in the probate fees in the future but it remains to be seen whether these will be linked to the value of the estate.’
Jean-Yves Gilg is editor in chief at Solicitors Journal