The government is accused of “abusing its constitutional powers” by a leading accountants’ group. The condemnation comes as plans to hike the cost of applying for probate were revealed.
Under the proposals, some grieving relatives would need to pay death taxes of up to £6,000 to secure legal control over a deceased’s estate. The fees must be paid upfront by loved ones before they can raise money from someone’s estate.
At present, the current cost of securing probate is £215, or £155 for families who use a solicitor. However, if the government gets its way, this cost is set to soar from April next year.
The new proposals see the government linking the charge to the size of the estate. And, while inheritances of less than £50,000 will be exempt (the current threshold is just £5,000), the fee could go up to £6,000 for estates estimated at over £2million.
According to the government, the maximum fee payable will be just 0.5 per cent of the estate. However, for larger inheritances, the hike could be as much as 3,771%.
The ICAEW body of chartered accountants has called the hike a “tax on wealth”, with the additional income expected to raise £150 million to pay for running the Ministry of Justice. The House of Lords, charities, financial experts, legal groups and some MPs have also criticised the planned changes to the system of probate.
Among the ICAEW’s criticism of the fee hike was the fact idea that higher probate fees will be based on an entire estate and not just a property. Simultaneously, Government’s allowance on inheritance tax now lifts most homes out of the bracket to pay inheritance tax. Whilst many estates will benefit from a break in inheritance tax, they will be expected to pay a significant ptobate fee, almost negating the initial saving.
Additionally, the ICAEW worry that the courts will be overwhelmed by applications for probate over the next three months in a bid to avoid the new fees applicable from April.
An ICAEW spokesperson commented: “’The probate offices will need to gear themselves up for an influx of applications in advance of the planned increases as executors rush through the process to try and beat the price hike.”
Critics of the hike believe that the new system will be unrelated to, and often disproportionate to how much it costs to process a probate application. As such, they argue that it is a tax which requires new legislation.
The government has been charged with using its existing powers to force the change rather than passing a new law. And, it is argued that the suggestion needs to go through the proper process for introducing a tax. The government has also been criticised of sneaking in the extra tax following the Budget.
However, the government disagrees, stating that: “Parliament gave us the power to set these proposed fees, and they will be fully scrutinised and debated by both Houses.”
The government has also defended its plans, highlighting that 25k more estates will pay no probate fees. It also claims that such fees are “vital to the effective running of our courts and tribunals”.
Some legal experts have raised concerns that the plans, if they go ahead, will discourage people from using wills. Instead, they might look to other options to pass on their assets, such as gifting during their lifetime. But this could leave them financially vulnerable.
The government had previously hoped to set the rate at £300 for those inheriting between £50,000 and £300,000. Escalating to £20,000 for estates worth more than £2million. However, after sparking a similar outcry to the latest proposals, these plans were deemed unlawful because the fees were equal to a new tax.
What do you think, are the new probate charges fair?
