The Taxpayers’ Alliance report concentrates on all taxes and charges, emphasising that whilst inheritance tax (IHT) is projected to raise £5.35bn for the Treasury in 2019-20, it is only one of many charges incurred when someone passes away.
As the majority of estates in the UK still do not pay IHT the average cost of death for homeowners in England, made up of probate fees, land registration fees and the costs of death certificates, amounts to £405. But this ignores the funeral costs which according to the latest figures released by the Money Advice Service average £3,757 in the UK.
As the threshold for IHT has been frozen at £325,000 since 2009-10, and the value of property has increased considerably in that time, more estates have been brought into the IHT net. As a result, the average Londoner for example might now expect to have property valued at more than £150,000 over the IHT threshold giving a potential IHT charge of more than £60,000 even before taking into account other assets.
The proposals to increase probate fees which were meant to take effect in April are currently on hold. However, if they were to be implemented as originally intended, a new banding system will apply. This would be good news for very small estates under £50,000 as these would pay no probate fees at all. However, estates over £300,000 would see significant increases with those valued at more than £2m, the highest band, paying probate fees of £6,000, which is a huge increase on the current £215 standard fee.
With the Office of Tax Simplification making recommendations to simplify lifetime giving perhaps this is the time to start planning to mitigate the cost of the inevitable.