Families miss inheritance tax refunds on investment losses due to probate delays

Families miss inheritance tax refunds on investment losses due to probate delays


Worsening probate delays are leaving many bereaved families ‘at their wits’ end’ and out of pocket on reclaiming tax on investment losses, say legal and money experts.

Wait times on unlocking estates have lengthened again according to the latest official figures, following a warning by lawyers last month that grieving relatives are suffering emotional anguish and seeing property sales collapse during the probate process.

Some are also missing out on inheritance tax refunds because they breach the one-year deadline to claim relief on share price falls, prompting calls for the Government to extend this time limit.

Probate delays: Lawyers warn grieving relatives are suffering emotional anguish and seeing property sales collapse during the process

Applying for probate is a vital step to gain control over an estate after someone dies, allowing executors to access bank accounts, settle debts and sort out bequests.

The average wait time for both paper and digital applications from submission to granting of probate was 10.8 weeks in the first three months of the year, up from 9.6 weeks in the final quarter of 2022.

The average delay for digital applications, which are typically faster, rose to 8 weeks from 7.3 weeks over the same periods.

Law firm Nockolds notes that delays are caused when applications are stopped due to a dispute, problem with a wills or errors in applications.

It blames staff problems, saying complex cases often require more expertise in finer points of law, such as intestacy – where someone dies without a will – which suggests that the probate service is struggling with recruiting and retaining suitably qualified and experienced staff.

> How to avoid probate delays: Find tips on pre-empting common problems below 

Nockolds says nearly 90 per cent of probate applications are now made online, and as HM Courts & Tribunal Service has adopted a more streamlined ‘one-size-fits-all’ approach, it has increasingly struggled with some applications deemed too complex for this system.

The firm points out that a paper application is still required where someone has died leaving no will and no surviving spouse, and had more than one child.

Facing a long probate delay? 

Write and tell us your story at editor@thisismoney.co.uk. Please put PROBATE in the subject line.

Partner Sarah Lockyer says: ‘Around half of cases in which we are instructed are still unresolved 12 months after death. 

‘We have seen many more cases of this kind over the past year in which bereaved families are at their wits’ end and facing financial difficulties because of these delays.’

She adds: ‘The huge increase in delays affecting more complex probate applications suggests that there is a serious shortage of experienced and trained staff. 

‘Many of these cases will require a higher level of legal knowledge and judgement, and one can speculate that this is lacking at present.

‘The aim is to stop fewer applications to speed up delivery, but there are often good reasons why many probate cases are stopped and if applications are processed quickly without due care and attention, this may mean that grants are issued incorrectly.’

Lockyer identifies three financial costs, on top of the emotional cost of protracted waits for probate.

– Extra professional fees, because executors must often complete additional tax returns, for example.

– Property sales falling through, which in a difficult property market means homes are finally sold for considerably less than they would otherwise.

– Paying more inheritance tax than necessary if grant of probate takes too long, as families miss out on claiming tax relief on share price falls by breaking a one-year deadline.

Got a tax question? 

Heather Rogers, founder and owner of Aston Accountancy, is This is Money’s tax columnist.

She can answer your questions on any tax topic – tax codes, inheritance tax, income tax, capital gains tax, and much more. You can write to Heather at taxquestions@thisismoney.co.uk.

Lockyer says: ‘Investment losses are becoming more of an issue for bereaved families. 

‘In many cases shares are being sold for less than the probate value but due to ongoing processing delays with probate applications, executors are losing the opportunity to claim relief from inheritance tax.

‘The Government has resisted calls to extend loss relief from 12 to 18 or 24 months despite delays worsening.’

Sean McCann, chartered financial planner at NFU Mutual, also flags this issue and says the Government could extend the 12-month deadline to bring it in line with reclaims for properties that have fallen in value – where inheritance tax reclaims can be made up to four years after death.

‘Some families are experiencing long delays with probate, which is having a knock-on impact on their ability to reclaim overpaid inheritance tax,’ he says.

‘Inheritance tax is based on the value of assets at the time of death and is normally payable within six months. 

‘If the executors sell the shares or other qualifying investments at a lower value within 12 months of the death, they can reclaim the excess inheritance tax paid on the higher value.

‘Executors can only sell the shares once they obtain probate. 

‘It can take time to collate all the details of the estate and complete the inheritance tax forms to apply for probate, if you add on the delay in processing and any potential challenges from HMRC, you can run out of road to meet the 12-month deadline.’

What does the Government say?

Probate wait times Mar 2022-23 

Monthly figures on probate wait times are published here, and see the box on the right for the trends over the past year.

HM Courts and Tribunals Service was asked for comment, but did not respond by the time of publication.

A HM Courts and Tribunals Service spokesperson says: ‘Since December last year, we have recruited and trained one hundred new members of staff which has seen a rapid increase in the number of grants processed – with March seeing the highest number approved since January 2020.   

‘We know delays are frustrating for customers and we’re also looking at how we can improve our services to bring down waiting times.’

It says ‘stopped’ applications often require further information from the applicant, such as corrections to necessary forms, before they can be progressed.

More than 90 per cent of probate applications are completed digitally, which is faster than doing it on paper. Meanwhile, probate cannot be granted until inheritance tax is settled with HMRC, which can also cause delays. 

HMCTS is still seeing high volumes of probate applications following the Covid-19 pandemic, and the death rate ran higher than the five-year average until the end of summer 2022. 

It is trying to reduce the wait times for paper applications which are more complex and take longer.

Waiting times information includes applications which have had to be stopped due to errors on the form or missing documents such as the inheritance tax form or the original will. 

How to avoid probate delays 

If you’re handling the probate process yourself, then Solicitors for the Elderly chair Michael Culver suggests the following tips to pre-empt some of the common problems.

1. If in doubt, seek out an SFE member to review your application before you submit it. Many of our members will happily review and feedback on any changes required for an agreed fixed fee.

If applying online, you can share your password and log-in details with your solicitor, but usually it will send a code to your email so it’s best to do it in the same room where possible, or over the phone.

We’d recommend getting in touch with a lawyer for a fixed fee meeting in the office. We’d ask someone to bring all of their paperwork and log in details ready to review the online application together before making the submission.

Michael Culver: Lengthy delays can be exhausting for grieving families already managing the distress of losing a loved one

Michael Culver: Lengthy delays can be exhausting for grieving families already managing the distress of losing a loved one

In central London you might pay around £300 for a fixed fee one-hour meeting to review the online probate application, but this is assuming there’s no inheritance tax payable.

If there are inheritance tax forms to check, it wouldn’t be a fixed fee as it would likely take three to four hours of additional work and the total could be closer to £1,000.

This will differ per region and per firm.

2. If tax is payable wait 25 working days from sending the inheritance tax paperwork to HMRC before applying for probate.

This is recommended even if HMRC have confirmed receipt of the paperwork in the meantime, in order to give them time to share the paperwork with the tax service.

The lack of a response from HMRC is one of the main causes for an application being stopped.

3. Ensure all names match those within the will or explain why if there is a difference.

4. Explain why one executor isn’t applying for the grant if appropriate.

5. Ensure all documents including the original will are included when sending documents to HMCTS.

6. If there is no will, make sure you explain why you are entitled to apply for the grant.

> Read a This is Money guide to getting probate 

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