£20k ‘death tax’: Government new Tax charge

The Government’s dramatic increase in probate fees is attracting more outcry as it emerges the Ministry of Justice does not know how much it costs to handle an application for probate.

From next month, a new system takes effect that will see the largest estates pay £20,000 in probate fees. Probate must be granted to execute the wishes of the deceased as expressed in their wills.

Currently applications cost £155 if submitted by a solicitor or £215 if you do it alone. This is charged irrespective of the size of the estate but is waived for estates worth less than £5,000.

Under the new model estates valued at less than £50,000 will pay no probate fees but above this threshold families will be charged a minimum of £300 and up to £20,000 for estates over £2m.

The MoJ has said the measure would raise £300m towards the billion-pound cost of running the courts and tribunals service. However, a Freedom of Information request reveals the MoJ does not even know the average cost to the Government of processing probate applications.

Steve Webb, former pensions minister and director at Royal London, the pension company that filed the request, said the changes are a “backdoor way of raising money from people in their time of greatest need”.

He said: “The Government is treating bereaved families as if they were a ‘nice little earner’. It is one thing to make a reasonable charge for the provision of a public service.  But the Ministry of Justice has now admitted it does not know the cost of handling a probate application and sees no reason to find out what it is.

“This is clear evidence that the new charging structures are nothing to do with recovering the reasonable cost of processing probate applications.”

The increase in probate fees had also been challenged in Parliament. Last week a committee of MPs said the Government may be acting beyond its powers. They argued the probate fee actually appears more like a tax, because it is unrelated to the costs involved in handling probate applications.

Changes to taxation require the consent of Parliament and are therefore put under far greater scrutiny.

Rising probate fees come as more families are being taken out of inheritance tax. From this month, each individual has a £100,000 allowance in respect of their main residence in addition to the usual £325,000 allowance.

This new “main residence nil-rate band” will rise each tax year until 2020, when a couple will be able to pass on £1m tax free