The increasing cost of death

The Taxpayers’ Alliance recently published its report on the cost of dying. The report looks at the taxes and charges which arise on death and concludes that it is becoming more expensive.

The amount of Inheritance Tax (IHT) being paid continues to rise with the government projected to receive £5.35 billion from the tax in 2019/20. This is in part due to the freezing of the IHT threshold at £325,000 since 2009/10. The Taxpayers’ Alliance point out that IHT is not the only cost on death. Most estates don’t pay any IHT at all but will still incur charges including the cost of death certificates, land registry fees and probate. In addition there are funeral costs which apparently average £3,757 in the UK.

The average taxes and charges paid on death by homeowners in England excluding funeral costs is £405. However the actual cost on death varies considerably throughout the country depending on individual circumstances. In London the average cost of death for a homeowner could easily exceed £60,000 with IHT forming a large part of the cost due to high property values.

The proposed increase in probate fees which was due to take effect in April, but is currently on hold, could increase the costs on death significantly for estates valued at over £300,000. The proposed new banding system would see estates valued at under £50,000 pay no fees at all while those over £300,000 would see significant increases. Estates valued over the highest band of £2m would pay fees of £6,000 compared to the current flat fee of £215. It has been suggested that of those estates that pay probate fees under the new proposals 80 per cent will pay the fee of £750 which applies to estates valued between £300,000 and £500,000.

With the Office of Tax Simplification recently recommending changes to IHT and potentially increased probate fees on the horizon, death may become an even more expensive business in the future. Death is inevitable but with some forward planning the costs can be mitigated.