TAKE OUT A LOAN TO PAY DEATH TAX
As extent of stealth tax raid on wills emerges in Budget, families warned...
GRIEVING families may have to take out sky-high loans to pay new probate fees expected to earn the Treasury £1.5billion.
Officials admit those hit with crippling bills of £20,000 may resort to desperate measures.
Government analysis shows that many will have to borrow at costly, short-term rates. Others will be forced to beg for cash from family members or ask a solicitor to pay for them. The fees must be paid up front to win probate, which is the right to administer a dead person’s estate.
Charities, law groups and campaigners warn the new charges – detailed in Wednesday’s Budget documents – were excessive and unjustified.
Of 831 responses to a consultation about the shake-up, 97 per cent were negative. The Government has decided to go ahead anyway. Currently the executor of a will – usually a relative – pays a fixed £215 fee for probate, or £155 if using a solicitor.
But from May the charge will be linked to the size of an estate, and range from £300 to £20,000.
‘I have never seen a consultation where so many people disagreed,’ said George Hodgson, of the Society of Trust and Estate Practitioners.
‘Clearly the Government was going to push through the hike no matter
what, they just wanted the money.’
The official reason given for the change was to help provide more funds for the justice system.
Some in Government also believed a levy based on the size of the estate was fairer.
An individual leaving a house worth £500,000 and investments and bonds of £530,000 would see the probate fee increase to £8,000 – a 3,621 per cent rise.
Jacob Rees-Mogg, a Tory member of the Treasury committee, said ministers should reconsider. ‘I do not think it right that the Government should introduce stealth taxes,’ he said.
‘ Probate charges should relate to the cost of the probate work, which is broadly irrelevant to the size of the estate.’
Oliver Colvile, Tory MP for Plymouth, Sutton and Devonport, said: ‘I have real concerns about this. We absolutely do not need a death tax – which is what this sounds like.’
The Government is already facing a rebellion from its own MPs over a £2billion hike in National Insurance for the self-employed and a separate £2.6billion raid on dividends.
David Sinclair, of Solicitors for the Elderly, warned many people would just not have the cash available to pay the crippling fees.
He said: ‘For people in this situation, their property is often their primary asset, and they have little cash to pay for higher probate fees, on top of other necessities such as inheritance tax, funeral bills and the use of a solicitor.’
The higher fees will hurt families who have seen the value of their home soar. Around 2.5million people in England and Wales own properties worth at least £300,000.
The rise means that by 2022 the Government will make £350million a year from probate fees – up from the £45million it makes under the current system. The haul over five years is expected to be £1.5billion.
Probate fees have been used to cover administration costs rather than as a revenue-raising tool. But the Ministry of Justice said there was a £1.2billion shortfall in funding for HM Courts and Tribunals Service.
It added: ‘The Government believes this is unsustainable meaning that the Ministry of Justice must look at other ways to raise income.’ Probate has to be granted before families can release any cash from the estate – such as through selling the family home.
Mr Hodgson added: ‘These solutions appear to have been pulled out of a hat with no real consideration. The theory is that someone can borrow money to pay the probate fee and then claim it back from the estate.
‘But many people who act as executors of wills are not the beneficiary of the will so they will have put their hand in their own pocket and then to go back to the family and ask for money at what is already a very tense and emotional time.’
Robert Bourns, president of the Law Society of England and Wales, said: ‘The new fees go well beyond covering the cost of delivering probate services, and instead turn a profit on an essential public service that people have no choice but to use.
‘The significant increase in fees will place unfair financial stress on the family of the deceased at a time when they are already grieving. This will be particularly upsetting if the bereaved are facing cashflow issues ahead of the estate being dealt with.’
In some circumstances banks let families withdraw cash from a loved one’s account in order to pay funeral expenses and probate fees. And the Government insisted 92 per cent of estates would pay £1,000 or less and said no one would pay more than 1 per cent of the total estate in fees.
Asked if it was fair to increase probate fees for grieving families, the Prime Minister’s official spokesman said: ‘This was an announcement that was unrelated to the Budget and it came out a couple of weeks ago.
‘When it was announced, it was made perfectly clear that fairness was at the absolute heart of this change.
‘We removed a flat fee and it has become a progressive fee. We have raised the threshold at which no fee is paid to £50,000. It was £5,000. So yes, it is fair.’