Tory MPs have blamed ‘sneaky’ George Osborne for hikes to probate fees that will hand the Treasury a £1.5billion windfall.
The policy – which will see charges soar from just £155 to up to £20,000 depending on the size of the estate – was confirmed in the Budget this week.
But Chancellor Philip Hammond is being urged to ditch the ‘stealth tax’ along with other parts of his predecessor’s legacy.
Currently, families pay the Government a set £215 fee, or £155 if they apply through a solicitor, to get permission for probate – the legal authority to distribute someone’s property, savings and investments after they die.
But fees are set to rocket in May with new levels ranging from £300 to £20,000 depending on the value of the estate – and will be in addition to inheritance tax. Experts described it as a ‘stealth tax’ which will target the bereaved.
Grieving families will be forced to hand the Treasury a £1.5bn windfall under plans to hike probate fees. Budget documents show that by 2022 the Government will earn £350m a year from probate fees, a £115m increase on current levels
Small print in the Budget documents reveals how the Government will pocket hundreds of millions of pounds every year by scrapping the single flat fee.
The increase will hit those middle-class families passing on estates worth as little as £50,000 – effectively hitting them with a 40 per cent hike in fees.
Budget documents show that by 2022 the Government will earn £350million a year from probate fees, a £115million increase on current levels.
The new figure is £100million more than the Government’s original estimate, and over five years the Treasury will pocket £1.5billion from the changes.
Critics have accused the Government of profiteering from bereaved families and said they should drop the idea as a ‘hangover’ from the previous government.
Probate fees have typically just covered the cost of giving permission to hand out someone’s assets – the probate registry’s administration and staffing costs. File image
Tory backbencher Jacob Rees-Mogg told MailOnline it was an ‘Osborne legacy and a sneaky one’.
He said the fees were likely to be classified as a ‘tax rather than as a charge’.
‘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.
‘There might be some more work for bigger estates, but the difference will not necessarily be as large as has been proposed.’
George Hodgson, chief executive at the Society of Trust and Estate Practitioners, said: ‘The Government calls it a probate fee. But it’s clear from the figures that it is really just a backdoor tax on bereaved families – yet another attack on classic middle England.’
Claire Davis, director of Solicitors for the Elderly, said: ‘The exponential growth predicted for probate fee receipts, in line with the rise in inheritance tax, is further evidence that these changes are simply a stealth tax, designed to increase Government income.’
Probate fees have typically just covered the cost of giving permission to hand out someone’s assets – the probate registry’s administration and staffing costs.
But the Budget documents reveal that the fees are now being classified as a tax in the National Accounts – in other words, they now raise money for the state coffers.
Experts say that the higher fees do not marry up with the work involved.
Roman Kubiak, partner at law firm Hugh James, said: ‘The Government can’t hide the fact that this is a tax any more.
‘The hike in fees doesn’t reflect the work carried out by its probate office and it is clear that the money will be used to help prop up the rest of the court system.
‘This is fine – it’s vital everyone has access to justice.
‘But is it appropriate to tax estates to pay for this when they are already subject to inheritance tax?’
Truth about probate fees
Under the current system, estates worth more than £5,000 have to apply for probate.
This is done by the executor of that person’s will. The fee is £215 and is paid to the probate registry.
There are some exceptions if there is no property involved, as some banks may let executors withdraw up to £50,000.
However, from May the system will change.
There will be no fee for estates under £50,000 – about 58 per cent of all estates.
After that it is £300 for estates worth up to £300,000; £1,000 for estates worth more than £300,000 and up to £500,000; £4,000 for estates worth more than £500,000 and up to £1million; £8,000 for estates worth more than £1million and up to £1.6million; £12,000 for estates worth more than £1.6million and up to £2million; and, £20,000 for estates worth more than £2million.
Instead of charging a flat fee, the Government is bringing in a sliding scale based on the value of the assets of the person who died, ranging from zero for those worth less than £50,000, to a £20,000 charge for those estates worth more than £2million.
But millions of households will face bills of at least £1,000. Most will be relatives of older people who lived in the south of England, where house prices have soared.
Around 2.5million people in England and Wales own properties worth at least £300,000.
Experts are concerned because probate fees must be paid up front, and while many families have a valuable property they may have very little in savings.
This means that relatives could be left in a Catch-22 situation where they do not have enough cash to pay the probate fees until they inherit the property and sell it, but cannot sell it until probate has been paid for.
Under the current system the Government makes just £45million a year from probate fees.
A Ministry of Justice spokesman said: ‘We are introducing a fairer banded system of probate fees which will mean more than half of estates will pay nothing.
‘Fees are necessary to maintain an accessible, world-leading justice system which puts the needs of victims and vulnerable people first.’
How we revealed the plan to hike probate fees
We revealed last June how the Government planned to hike probate fees to as high as £20,000.
Experts told us that the Ministry of Justice’s plans involved jacking up probate fees beyond the point where they reflected the administration work involved.
Last month, we highlighted that despite a consultation delivering an overwhelming thumbs down to the move, the Government was pushing ahead regardless with a move dubbed a ‘stealth tax’ on the bereaved.
The vast majority of those who responded to the official consultation were legal experts, and just 2 per cent agreed that the proposed new fees were a good idea.
Meanwhile, only 8 per cent agreed that probate fees should even be graded on estate size.
The Ministry of Justice claimed that it had not ignored the consultation, despite pushing through the massive hikes that will subsidise the rest of the court system.
Now the Budget has confirmed that it will happen and the fee rises will rake in even more than expected.