Probate fees: a new back-door property tax
The dramatic rise in probate fees is a sneaky way for the government to tax residential property, says Merryn Somerset Webb.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Twice daily
MoneyWeek
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Four times a week
Look After My Bills
Sign up to our free money-saving newsletter, filled with the latest news and expert advice to help you find the best tips and deals for managing your bills. Start saving today!
We've been expecting the introduction of a new wealth tax in the UK for some time. And we have been expecting it to one way or another attempt to capture the huge rise in house prices in the southeast. This isn't easy to do rising council taxes always cause near riot conditions in the UK, the mansion tax idea didn't exactly fly, stamp duty is an appalling tax and pretty much at its limit already and there isn't much appetite (except from me...) for a capital gains tax on primary homes.
Kudos, then, to the clever clogs at the Treasury who have now come up with a new idea one that most people won't notice, that taxes money in limbo and that will end up raising a real amount of money (around £250m says the government but if properly enforced I suspect it will be rather more). It is the rise in probate "fees".
From 1 May probatefees paid by the executors of wills and estates in England and Wales from the assets in those estates will rise from its current level of £215 to as high as £20,000. Estates worth less than £50,000 will pay nothing. But from £50,000 the rate rises in bands until you hit £2m, after which all estates pay £20,000 (a rise of over 9,000%) despite the fact that as everyone agrees the cost of probate is much the same regardless of the size of the estate.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The fees will just like inheritance tax be payable before the estate is distributed to heirs (so some people will need to borrow to pay). This isn't a good tax much better would have been just to cut the inheritance-tax threshold or raise the rates (or do nothing).
But as most estates worth over £2m will be worth over £2m because they have houses in them, it does at least do something of what the government has long wanted to do: take a slice of the mostly unearned capital gains on UK residential property.
-
Average UK house price reaches £300,000 for first time, Halifax saysWhile the average house price has topped £300k, regional disparities still remain, Halifax finds.
-
Barings Emerging Europe trust bounces back from Russia woesBarings Emerging Europe trust has added the Middle East and Africa to its mandate, delivering a strong recovery, says Max King
-
Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
-
We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
-
Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
-
How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
-
Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
-
Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
-
Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
-
How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
