What does the Budget mean for Executors dealing with Probate?

What does the Budget mean for Executors dealing with Probate?

The headlines around inheritance tax following the budget were noisy on how farmers will be affected, on pension pots and on the fact that there is no rise on the nil rate band in the near future. However, in the small print there is an important change: that is the amount of interest charged on unpaid tax liabilities.

From 6th April 2025, this will increase by 1.5 percentage points to Bank Rate plus 4 percentage points. Late payment interest is currently charged at the Bank Rate plus 2.5 percentage points.

It is always a shock when a loved one dies, even if it is “expected”, and next of kin are regularly appointed as Executors.

A draw-back of appointing those closest to us as Executors is that, at the forefront of their minds is grieving and (often as part of that) making funeral arrangements. But inheritance tax is payable 6 months following death, with interest and potentially penalties arising from that date. And the Executors are personally liable for this.

Although 6 months may sound like ample time, where an estate is subject to an inheritance tax liability there can be many assets involved and, amongst other administrative responsibilities, Executors must ensure they are collating accurate figures for tax purposes. This burden is often compounded by third-party delays in providing the necessary information. In worst-case scenarios, family disputes and challenges to the Will side-track an executor, causing significant delays and thereby increasing the liability to HMRC.

With the nil-rate bands capped still at £325,000 and £175,000 (the latter applicable only if conditions are met to claim the residence nil rate band), and pension funds being brought into the taxable estate (from 6th April 2027), more estates are likely to incur an IHT liability.

Executors will need to be mindful to progress matters diligently therefore to avoid additional penalties. Perhaps just as (if not more) important is at the planning stage i.e. when people are writing their Wills, carefully considering who will be appropriate to take on the executor role and seeking help from professional executors where appropriate.

We are often consulted by Executors who have started the job themselves, only to find it far more burdensome than initially imagined. We are always happy to pick up and help, but early advice does make Executors go in with their eyes open, and perhaps their stress levels, and finances reduced.