Spring Budget 2023: Another teeny-tiny step towards simplifying the probate process for some estates!

When someone dies, it takes time to administer their estate.  Bank accounts and investments continue to generate income post death up until they can be closed, sold and/or distributed to the beneficiaries.  The personal representatives are required to account for this income and pay income tax on it at the basic rate; 20% for interest and 8.75% for dividends. There has been a concession for low-income estates which receive less than £500 income in the administration period.  This concession will be formalised and in addition, the personal representatives of low-income estates will no longer be required to report it to the beneficiaries on a form R185 for inclusion on their personal tax returns, if they complete one.  It is assumed the £500 limit does not include income generated by an ISA post death up until closure, as this income has been exempt for deaths since 6 April 2018.

The other much more significant simplification we have seen is for deaths after 1 January 2022. This has resulted in most non-inheritance tax paying estates being exempt from submitting a detailed Inheritance Tax Return as part of the probate process.  Those estates which qualify have benefitted from making direct application for probate to the HM Courts & Tribunals Service (HMCTS) in one step – the figures are included in three boxes on the probate application form.  This is opposed to a two-step process, where a detailed Inheritance Tax Return is submitted to HMRC first and after this has been processed, the probate application is made separately to HMCTS.  An estate may be non-inheritance tax paying due to the availability of the Main Residence Nil Rate Band and Transferable Main Residence Nil Rate Band. Broadly these additional Main Residence Nil Rate Bands are available to estates containing the deceased’s home which is inherited by their children or grandchildren.  Understandably the valuable Main Residence Nil Rate Bands must be claimed and this means following the much more detailed two-step process in those circumstances.  The conditions need to be carefully considered, and we would be very happy to review and outline what is needed to guide and reassure the personal representatives.

At Mercer & Hole, we provide a tailored professional probate, executor and tax service to fulfil the wishes of someone who has died. If you have any questions, please do contact me or a member of my experienced team.