Advertisement

Brace yourself for the death tax

As if having to sort out probate isn’t horrendous enough, says Sarah Moore, you might soon be hit with a new, expensive death tax.

As if having to sort out probate isn't horrendous enough, you might soon be hit with a new, expensive "death tax". This is set to kick in after a planned revision of probate fees, which must be paid in order to activate a will.

At the moment, you pay a flat rate of £215 for all estates worth £5,000 and over (or £155 if applying through a solicitor already sharply higher from £45 in 2014). But the government which has just released a consultation document on the topic wants to make the move to a tiered system, which would see some families having to pay a fee of as much as £20,000.

Advertisement - Article continues below

The reasoning behind the proposed changes is that families who inherit an estate worth less than £50,000 would no longer have to pay a probate fee at all (currently only estates worth less than £5,000 incur no probate fee).

The new fee would only kick in when an estate is worth more than £50,000 and would then increase in stages, depending on the value of the estate. (Estates over £50,000 would pay £300; those valued at more than £300,000 would pay £1,000; those valued between £500,001 and £1m would pay £4,000; those up to £1.6m, £8,000; those up to £2m, £12,000; and those over £2m, the maximumfee of £20,000). According to the Ministry of Justice, the change would mean that 57% of estates pay no fee, while 84% would pay no more than £300.

While it's being presented as a new death tax, you could also argue that it's an indirect form of property tax. Given the rapid rise in house prices in the southeast of England, for example, it's quite possible that an otherwise relatively modest estate that includes a family home could breach the £500,000, or even £1m threshold, triggering probate fees of up to £8,000. When you add this amount on to money paid out in inheritance tax, and the various other nasty practical costs associated with probate (£4 per copy of the death certificate), it's a significant jump in the costs involved in an already unpleasant process.

It's also a reminder that our indebted government continues to look for revenue-raising opportunities wherever it can find them. While removing the fee on the lowest-value estates would save money for some, overall the government hopes to raise an extra £250m a year. Expect further stealth taxes along the same lines.

Advertisement
Advertisement

Recommended

Visit/519223/how-can-we-raise-more-money-in-tax
Economy

What are the best ways of raising more money in tax?

Given that whoever wins next week's election will be going on a massive spending spree, we're going to need to raise at least some of that money throu…
5 Dec 2019
Visit/518715/what-are-the-biggest-mistakes-investors-make-when-it-comes-to-tax
Investment strategy

What are the biggest mistakes investors make when it comes to tax?

The tax implications of an investment are something we rarely consider until after the event. That could prove to be an expensive mistake, says Domini…
27 Nov 2019
Visit/516603/how-tax-has-shaped-the-course-of-human-history
Economy

How tax has shaped the course of human history

Taxation is as old as civilisation itself. But how much is too much? Dominic Frisby looks at how taxation, war and society have evolved together over …
16 Oct 2019
Visit/economy/small-business/601438/an-update-for-the-business-rate-support-scheme
Small business

An update for the business-rate support scheme

The government has added £600m to plug the gap in its small business rates relief scheme for businesses in shared-office buildings.
5 Jun 2020

Most Popular

Visit/investments/commodities/gold/601444/these-seven-charts-show-exactly-why-you-must-own-gold-today
Gold

These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020
Visit/investments/stockmarkets/601460/disease-rioting-and-mass-unemployment-so-why-are-markets-soaring
Stockmarkets

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
Visit/investments/commodities/601433/commodities-possibly-the-biggest-opportunity-in-todays-markets
Commodities

This looks like the biggest opportunity in today’s markets

With low interest rates and constant money-printing, most assets have become expensive. But one major asset class hasn’t. John Stepek explains why com…
2 Jun 2020