Brace yourself for the 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.

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.