Relatives inheriting estates worth more than £300k are going to be hit with huge increases in court fees as the Government looks to target them as a way to reduce its Budget deficit.
Millions face having to pay extra probate charges of up to £20k as the Ministry of Justice proposes scrapping the current fixed fee of £215.
Accountancy firm, Bishop Fleming, branded the charges as a new inheritance tax in all but name as the “astronomical” increase is expected to raise an additional £250 million for the Treasury.
According to the Government’s own figures, the current flat fee already adequately covers the administrative costs for the courts in processing grants of probate – giving executors the right to distribute the proceeds of someone’s will. The current fee does not change whether the value of the estate is worth £5k or £5 million.
The new system would impose a slab-based tax starting at £300 for estates worth between £50k and £300k, but an estate worth £300,001 would pay £1k, that is £785 more than now for an extra £1. An estate valued at £2 million will pay £12k, but an estate worth £2,000,001 will pay £20k- an extra £8k for just £1 more.
With figures showing average house prices in the UK having soared to around £288k by the end of 2015, thousands more estates look likely to be caught by the new charges as prices continue to rise.
Bishop Fleming partner, Matthew Lee, explained: “Not only are the proposed increases morally wrong as they are a further tax on grieving relatives, but the fact that the government wants to impose a slab system of tax that has previously been recognised as unfair makes an already difficult situation for the bereaved even worse.”
Couples face a double whammy in that the new fees will have to be paid both on the first death and the second – up to £40k.
Defending the proposed increase, the Government claims estates will benefit from an increased nil-rate Inheritance Tax band for homes inherited by descendants, but according to Lee many estates will not benefit from this as they won’t have the right kind of asset or the right kind of descendant.
“This is a disguised Inheritance Tax and the Government is being sneaky in introducing this as a simple fee for dealing with people’s estates,” he added.
The Government has asked for responses to its proposals by April 1.