When someone passes away there is a lot to think about and do – and it can be tempting to think that you’d like to save some money by dealing with that person’s affairs on your own rather than calling in professional help.
However, the Express recently highlighted why it’s so important to get advice from the experts when you’re tackling probate to ensure that you don’t end up missing out on tax breaks that you’re entitled to because you don’t fully understand the process.
In fact, the newspaper revealed that some families have lost hundreds or even thousands of pounds by paying unnecessary inheritance tax because they chose to perform ‘DIY probate’ online instead of getting help from probate solicitors in Surrey or wherever they live.
According to the news provider, five out of six taxpayers are failing to claim for their family home, which they’re entitled to do under the new “main residence nil-rate band”, for example.
It cited data from NFU Mutual, which described the take up of this tax break as “shockingly low”. The insurer’s research found that just 4,000 of the 24,000 estates that paid inheritance tax last year claimed this particular benefit.
Sean McCann, a chartered financial planner, explained that part of the problem is that more people are carrying out probate online themselves, but don’t realise that they have to apply for this allowance and that it won’t automatically be granted.
“The good news is that anyone who may have missed out can still claim retrospectively,” he stated.
Further research from law firm Wilsons found that fewer families are claiming inheritance tax relief now than they did five years ago. According to the organisation’s data, just 41 per cent of estates that paid death duties claimed reliefs, compared to 54 per cent in 2013.
Because of its complexity, there are now calls for inheritance tax to be abolished and replaced with a new, fairer system. The Resolution Foundation recently published a report for the Intergenerational Committee, which stated that inheritance tax should be made fairer for families while also being harder to avoid.
The suggestion being proposed by the organisation is a Lifetime Receipts Tax, which would see the recipients of inheritance being taxed, rather than the overall estate. However, each person would have their own lifetime limit on inheritance and only be taxed once they surpassed this, while the proposals also see taxation applied at a much lower rate.
Senior economic analyst at Resolution Foundation Adam Corlett explained that scrapping the current system and replacing it with this proposed tax would “be fairer to families, harder to avoid and would ensure our tax system keeps up with 21st century Britain”.
While the changes may seem like a reasonable idea, they are far from being on the table, so for now we still have to deal with the current probate system.
It’s easy to see, with so many reliefs available for different things, how someone trying to manage this alone could miss something that ends up costing them money. In the end, the decision to save on legal fees by doing probate on your own could be a false economy if you end up overpaying your inheritance tax.