A House of Lords Committee has criticised the government’s proposed new ‘death tax’ levied in the form of a probate fee, echoing comments it made the first time the charges were proposed.
Earlier this month, the UK’s Ministry of Justice introduced the new probate fee of 0.5% on estates worth £50,000 or more, although it also set a cap of £6,000 for estates worth over £2m.
By increasing the threshold for which the probate fee is incurred to £50,000 from the existing £5,000, the new structure did lift around 25,000 estates annually out of fees altogether. By also capping the at 0.5%, instead of the 1% initially proposed, around 80% of estates will only now pay £750 or less.
However, the Secondary Legislation Committee in the House of Lords said: “Although, in this new version, the scale of the individual fees has been reduced, the committee has not changed its view on the underlying principle, that is that the fee bears no relationship to the actual cost of approving the probate application and has the appearance of a tax.”
The highest fee, on estates valued at more than £2m, would be £6,000. Estates valued at £50,000 or below will not face any charge. Before last year’s general election, the government had proposed a fee of £20,000 for estates valued at over £2m.
Explanation
The Committee said that the government needs to explain its basis for taking the new course rather more clearly, so that the House may better understand its approach.
The committee concluded: “We reiterate the conclusion expressed in our 28th Report of Session 2016–17: “while section 180 of the Anti-social Behaviour, Crime and Policing Act 2014 permits the levying of enhanced fees, we are surprised to see it used to this extent.
“To charge a fee so far above the actual cost of the service arguably amounts to a “stealth tax” and, therefore, a misuse of the fee-levying power.”
Rachael Griffin, tax expert at Quilter, said: “The house of cards the Ministry of Justice has based its probate hike on is coming crashing down as the ground from under them is shifting in every different direction.
“The House of Lords also turned their backs on the MoJ labeling the hike, as it should be, a stealth tax. The move from a flat rate fee structure to one which is tiered based on assets could, in theory, have been an acceptable model, but the level of fees imposed are unjustified.
“They are far more expensive then covering the cost of the administration, which is what the fee should be. This current suggestion needs to go through the proper process for introducing a tax, not a back-door conjured up by the MoJ.”
