If we deal with the estates of deceased persons, HMRC’s Trusts & Estates newsletter is essential reading. This month’s edition contains some important information about reliefs that apply from 6 April 2017, forthcoming charges, and a new Trusts Register.
Banks, building societies and NS&I no longer deduct tax from interest paid. For most individual taxpayers, the interest they receive will be taxed at 0%, as it is covered by their savings allowance or savings rate band. Estates of deceased persons are not entitled to the savings allowance, or savings rate band, so all the interest the estate receives during the period of administration is taxable, and should be reported to HMRC on a tax return.
To avoid thousands of tax returns being submitted reporting tiny amounts of interest, HMRC introduced a concession for 2016/17. This allows administrators of an estate not to submit an income tax return for the estate where the only income is savings interest and the tax liability is below £100. This concession has been extended to 2017/18.
Probate fees have to be paid by the personal representatives before the estate can be dealt with, but probate is not granted until any IHT is paid, or HMRC has confirmed that no IHT is due. PRs normally have up to a year to deliver the IHT account, but now they may wish to speed up that process to avoid the new probate fees which are due to come into effect in May 2017.
The current probate fee is £155 if the application is made by a solicitor, or £215 if made by an individual. It is proposed that those fees are replaced by charges which vary according to the value of the estate; ranging from £300 for an estate of £50,000 to £300,000, up to £20,000 for an estate valued at over £2m. HMRC has advised that as long as the application for probate is made before the new fee structure comes into effect, the old flat rate probate fees will apply.
We do not know the exact date from which the new probate fees will apply, as the changes must be made by a Statutory Instrument, which has come in for criticism in as introducing a tax on estates by the back door. With limited time available before Parliament is dissolved for the General Election, it is possible that this Statutory Instrument will not be passed.