HMRC no longer reviewing Family Investment Companies
Plans to introduce the stealth tax move even closer after the legislation was narrowly approved following a committee hearing on 7 February 2019.
Despite criticism that the new fees amounted to a ‘tax on grieving families’, the Fourteenth Delegated Legislation Committee voted by nine votes to eight to approve the legislation which introduces probate fees as high as £6000.
The Order will now go before the House of Commons where it will, barring a majority of objections, be passed. The changes are due to come into force in April 2019.
The House of Lords has voted through the proposal which will introduce a new stealth death tax for the middle classes from April 2019. The fees payable to the Probate Registry will be dramatically increased from a flat rate of £155 for a solicitor application or £215 for a personal application for estates above £5,000, to a maximum of £6,000.
So, what should you do? In short, act quickly! No specific date other than April 2019 has currently been set for the new probate fees. The new probate fees are a stealth tax, plain and simple. If your estate is in the range of £50,000 to £2 million as at death, the more your estate will pay (and that is likely to be on top of 40% inheritance tax).
Any probate applications submitted prior to the fee increase should only incur the current lower fees. If you have been intending to deal with the probate of a loved one, now is the time to take action. Probate applications can take a number of weeks/months so you should obtain legal advice as soon as possible.
Similarly, if you are concerned about how the increased probate fees may affect you or your estate in the future, you should obtain legal advice to discuss tax planning.
What happened? Although the House of Lords added pressure on the government to pull proposals for the probate ‘death tax’, it stopped short of rejecting the plans outright and ultimately voted through the proposal. The next step is for the House of Commons to scrutinise the relevant legislation. No date has been set yet but it is likely to be imminent bearing in mind the plan is to introduce the new fees in April 2019.
What does this mean? As we referenced above, the new legislation would dramatically change the probate fee landscape. Currently fees are set at a flat rate, however the new fees would be scaled according to value. The government, of course, promotes zero fees applying to estates below £50,000. The government’s claim that this is a good thing falls away when you look at the average middle class estate fees:
|Estates worth up to £50,000 are exempt from requiring a
grant of probate (increase from £5,000)
|Estates worth from £50,000 to £300,000||£250|
|Estates worth from £300,000 to £500,000||£750|
|Estates worth from £500,000 to £1 million||£2,500|
|Estates worth from £1 million to £1.6 million||£4,000|
|Estates worth from £1.6 million to £2 million||£5,000|
|Estates above £2 million||£6,000|
This means a 61% increase for an estate worth £50,000 to £300,000 and a 3,771% increase for estates worth £2 million and above. For an estate worth from £1.6 million to £2 million this is a massive £5,845 difference.
To discuss probate applications and tax planning contact our private client team.
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