How will the “stealth death tax” impact charities?

Charities are worried about the impact the new “stealth tax” could have on legacy giving.

The Government is facing condemnation after its plans to hike the cost of applying for probate were revealed. Under the proposals, some grieving relatives would need to pay death taxes of up to £6,000 to secure legal control over a deceased’s estate.

But in addition to families, charities could also feel the impact. In fact, according to The Institute of Legacy Management (ILM), charities will lose out by more than £10 million per year under the proposals.

In response, the Government has been asked to reconsider its stance. Speaking about this issue, the Chief Executive officer of ILM, said that it was deeply concerned by the proposed rise in probate fees.

At present, the current cost of securing probate is £215, or £155 for families who use a solicitor. However, if the Government gets its way, this cost could soar to £6,000 from April next year. This could have a devastating impact on those charities who are reliant on legacy gifts and significantly reduce their income.

At a time where many charities are struggling to meet increasing demand for their services, this could have a considerable impact on many groups across the UK.

The proposals have also come under fire for being a “stealth tax”. This is because the current fees cover the average costs of making a grant of probate, but the new fee structure is hugely disproportionate.

Is it a new tax?

Introducing a new tax requires new legislation. But the Government is using its existing powers to force the change rather than passing a new law. If passed, the new tax will side-step the long-established exemptions and reliefs of the inheritance tax regime, including the charity exemption.

With concerns that this stealth tax will be shouldered  – in part at least by charities – the impact on the sector is expected to be significant. So much so that millions of much-needed funds could go to the Government, rather than being used to fund vital services.

The Government has responded by stating that the cost to the charity sector is “not expected to be substantial”.

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