Thousands of bereaved families awaiting probate face expensive penalties on their inheritance tax (IHT) bills because of delays caused by Budget pension changes.
The number of probate cases taking more than a year has soared by 134 per cent since Covid, according to data from the Ministry of Justice.
In the UK, IHT must be paid by the end of the sixth month following the date of death, but sometimes it can take much longer for the Government to grant probate – an important legal document needed to release funds and distribute them to beneficiaries.
This can leave families paying interest to HM Revenue & Customs (HMRC), which is currently charged at a rate of 7.25 per cent.
The issue often impacts families inheriting an estate where the main asset is a house, and who are reliant on the proceeds from the sale to pay IHT bills.
From April, HMRC will hike its interest fees on late payments to 8.75 per cent – an increase of 20.1 per cent and its highest level since 1992.
The data, obtained via a Freedom of Information (FOI) request by Quilter, revealed that last year, 2,722 people had to wait more than six months for probate to be granted.
The year before, 10,103 people experienced delays. Although last year’s figure is significantly lower, there are fears that changes announced in the Autumn Budget may lead to a further increase in wait times.
Below, the table shows the number of people applying for probate and the length of time it has taken to grant it.
In October, Chancellor Rachel Reeves confirmed that from 2027, the value of someone’s pension pot will be brought into their estate when calculating the overall value.
According to government estimates, this could mean that an additional 10,000 estates will be liable for IHT in the 2027/27 tax year.
Jon Greer, head of retirement policy at Quilter, said: “Under the current set of rules, we are already witnessing huge delays in granting probate causing significant stress for grieving families.
“With pensions set to become part of the taxable estate from April 2027, the situation is only likely to worsen.
“Pension schemes often remain unaware of a member’s death immediately, delaying legal and tax processes.
“This means legal personal representatives will face an even greater burden, consolidating information across multiple pension schemes.”
In almost 1,400 cases in 2023, families waited more than a year for probate to be granted – the latest full year for which data exists, up from 930 in 2022 and 587 in 2020.
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Read MoreMeanwhile, over 130 cases took between 21 and 23 months, compared to 97 in 2022.
Reeves also revealed in the Budget that it was increasing the interest charged on late payments of tax.
It is currently charged 2.5 percentage points above the Bank Rate, which is now 4.75 per cent. But from April, it will be 4 percentage points over. This could come down if the Bank cuts its base rate in February.
She also said the freeze on IHT thresholds would be extended until 2030, meaning the £325,000 tax-free allowance remains unchanged, despite years of house price growth pushing many estates over this threshold.
The average IHT bill was about £200,000 in 2024, according to estimates by the Office for Budget Responsibility (OBR).
A family that owed £200,000 and paid it a year late would currently incur a £14,500 charge, according to Quilter. Under the new rate of 8.75 per cent, the interest owed would rise to £17,500.
Steve Webb, partner at pension consultants LCP, said: “It is already a hugely challenge job to sort out a loved one’s financial affairs after their death. Delays in granting probate add to the stress and this is set to get worse if government proposals go ahead to include pensions in the IHT net.
“Once the new system is in place, people will have to contact all of a loved one’s pension schemes and gather information from them before the probate application can even be made.
“It could easily become the norm that it is well over a year after someone’s death that their financial affairs are finally sorted out”.
Rowan Morrow-McDade, tax director at Alexander & Co chartered accountants, told The i Paper: “Delays in obtaining probate in the UK are very concerning, particularly for estates requiring the release of funds to settle IHT liabilities.
“These delays are often attributed to increased application volumes, procedural inefficiencies, and likely gross understaffing within the Rrobate Registry.”
Following the interest rate hike in April, an estate with a £500,000 IHT bill would face a yearly interest charge of £43,750, or £841 a week, he said.
He added: “If there is a delay in obtaining probate it can mean executors cannot access the money to pay, therefore incurring these huge interest charges through no fault of their own.
“With enormous tax changes in April 2026 and April 2027 bringing many more estates into the IHT net it is vital that there are no more delays in obtaining probate.”
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