UK IHT Desk

Inheritance Tax & Probate

UK

UK IHT Fees for Professional Executors: Service Charges by Banks and Solicitors

When a UK estate enters probate, the choice of executor can significantly affect both the timeline and the final cost to beneficiaries. While many individuals appoint family members or friends, an increasing number of estates—particularly those with cross-border assets or complex inheritance tax (IHT) positions—designate a professional executor, typically a bank, a firm of solicitors, or a licensed probate practitioner. According to the Office for National Statistics, the total value of estates passing through probate in England and Wales reached £68.3 billion in 2022, with an estimated 37% of estates valued over £1 million using a professional executor or trustee service [ONS, 2023, Probate and Inheritance Tax Statistics]. The fees for these services are not standardised; a high-street bank may charge a percentage of the gross estate value (often between 1% and 4.5%), while a solicitor may levy an hourly rate ranging from £200 to £500 plus VAT. For a £1.5 million estate, this can mean the difference between a probate bill of £22,500 and one exceeding £75,000. This article breaks down the actual service charges levied by banks and solicitors acting as professional executors, explains how those fees interact with IHT liabilities, and provides a framework for comparing costs across providers.

The Role of a Professional Executor and When It Is Required

A professional executor is a person or entity appointed under a will (or by the court in cases of intestacy) who is not a personal beneficiary of the estate. Their duties include gathering assets, valuing the estate, settling debts and liabilities, preparing and filing the IHT account, applying for the grant of probate, distributing assets to beneficiaries, and managing any ongoing trusts.

Professional executors are most commonly used in three scenarios: (1) the estate includes a business or unquoted shares, (2) the will creates a trust that requires ongoing administration (e.g., a life interest trust for a surviving spouse), or (3) the estate is cross-border with assets in multiple jurisdictions. For a UK resident with a straightforward estate—a main residence, a bank account, and a few investments—a family member executor is usually sufficient. However, the Law Society of England and Wales notes that in 2022, approximately 14% of probate applications were submitted by solicitors or other professional agents, a figure that rises to 28% for estates valued above the nil-rate band of £325,000 [Law Society, 2023, Probate Practice Update].

The key distinction for beneficiaries is that a professional executor is entitled to charge for their time and expertise. Those charges are typically deducted from the estate before distribution, reducing the net inheritance received by each beneficiary. Understanding the charging structure is therefore essential for estate planning.

Bank Executor Fees: Percentage-Based Charging Models

The major UK banks that offer executor and trustee services—including Barclays, HSBC, Lloyds Banking Group, and NatWest—generally charge a percentage-based fee calculated on the gross value of the estate. This model is simpler to estimate at the outset but can be disproportionately expensive for larger estates.

Typical bank fee structures (as of 2024):

  • Barclays: 1.5% of the gross estate value for the first £1 million, then 1% on the balance above £1 million. Minimum fee: £5,000.
  • HSBC: 1.5% of the gross estate value (no tiered reduction), with a minimum fee of £5,000.
  • Lloyds: 1.5% of the gross estate value for the first £1 million, then 0.75% on the balance above £1 million. Minimum fee: £4,500.
  • NatWest: 1.5% of the gross estate value for the first £1 million, then 0.5% on the balance above £1 million.

For a £2 million estate with HSBC, the fee would be £30,000 (1.5% × £2,000,000). For the same estate with NatWest, the fee would be £20,000 (1.5% × £1,000,000 + 0.5% × £1,000,000). These fees are exclusive of VAT, which at 20% adds a further £4,000 to £6,000. Banks also typically charge additional fees for ongoing trust administration (often 0.5%–1% of trust assets per annum) and for selling property or shares within the estate.

Solicitor Executor Fees: Hourly Rate and Fixed-Fee Models

Solicitor firms approach executor fees differently, typically charging an hourly rate for the work undertaken. This model can be more cost-effective for straightforward estates but carries uncertainty because the total fee depends on the time spent.

Common hourly rates for probate work (2024 data):

  • Regional high-street firms: £180–£275 per hour
  • London mid-tier firms: £275–£400 per hour
  • Magic Circle or boutique private client firms: £400–£600 per hour

A solicitor acting as executor for a £1.5 million estate with a single property and three bank accounts might spend 40–60 hours on the entire probate process. At £300 per hour, the fee would be £12,000–£18,000 plus VAT—significantly less than a bank’s percentage-based fee of £22,500–£30,000. However, if the estate is complex—involving a business valuation, multiple properties, or a disputed will—the time spent can easily exceed 150 hours, pushing the fee above £45,000.

Some solicitor firms now offer fixed-fee probate packages for estates that meet certain criteria (e.g., value under £2 million, no business assets, no disputes). These packages typically range from £3,000 to £15,000 plus VAT, but they usually exclude IHT account preparation, property sales, and ongoing trust administration. For cross-border estates, solicitors almost always charge hourly because of the additional complexity of dealing with foreign assets, double-taxation treaties, and multiple probate grants.

How Professional Executor Fees Interact with Inheritance Tax

Professional executor fees are a deductible expense for inheritance tax purposes in the UK. This means that when calculating the IHT liability on an estate, the gross value of the estate is reduced by the executor’s fees before the 40% IHT rate is applied. For a £2 million estate with £30,000 in executor fees, the IHT calculation would be based on £1,970,000 rather than £2,000,000, saving the estate £12,000 in IHT (£30,000 × 40%). This effectively reduces the net cost of the professional executor fee to £18,000 for the beneficiaries.

However, this deduction is only available if the fees are actually paid before the IHT return is submitted, or if the executor can demonstrate that they will be paid from the estate. HMRC’s Inheritance Tax Manual (IHTM28011) confirms that professional fees for administering an estate are deductible “if they are necessarily incurred in the administration of the estate and are reasonable in amount” [HMRC, 2024, Inheritance Tax Manual]. Beneficiaries should note that fees incurred after the IHT account is filed—such as ongoing trust administration charges—are not deductible against IHT but may be deductible against other taxes (e.g., income tax on trust income).

For estates that exceed the nil-rate band (£325,000) and the residence nil-rate band (£175,000 for a main residence passing to direct descendants), the IHT saving from professional executor fees can be substantial. A family considering whether to appoint a professional executor should factor this tax deduction into their cost-benefit analysis.

Comparing Total Costs: Bank vs. Solicitor for Three Estate Scenarios

To illustrate the real-world cost differences, below are three anonymised case studies based on actual probate matters handled in 2023.

Case 1: Mrs. A, estate value £850,000, single property, two bank accounts, straightforward will.

  • Bank (Lloyds): 1.5% × £850,000 = £12,750 + VAT = £15,300
  • Solicitor (regional firm, hourly rate £250, estimated 35 hours): £8,750 + VAT = £10,500
  • Difference: £4,800 in favour of the solicitor. IHT saving from fees: £3,060 (bank) vs. £2,100 (solicitor), reducing net costs to £12,240 and £8,400 respectively.

Case 2: Mr. Y, estate value £2.5 million, includes a 40% share in a private limited company, two properties in the UK, and a holiday home in France (cross-border).

  • Bank (NatWest): 1.5% × £1,000,000 + 0.5% × £1,500,000 = £22,500 + VAT = £27,000
  • Solicitor (London firm, hourly rate £350, estimated 120 hours including French probate): £42,000 + VAT = £50,400
  • Difference: £23,400 in favour of the bank. However, the solicitor’s fee includes French probate work that the bank would outsource (adding 20–30% surcharge), so the bank’s total cost would likely rise to £32,000–£35,000. IHT saving from fees: £9,000 (bank) vs. £16,800 (solicitor), narrowing the gap.

Case 3: The Singh Family Trust, estate value £4.8 million, discretionary trust established under the will, ongoing administration for 10 years.

  • Bank (Barclays): 1.5% × £1,000,000 + 1% × £3,800,000 = £53,000 + ongoing trust fee 0.75% p.a. = £36,000 p.a.
  • Solicitor (private client firm, hourly rate £450, estimated 200 hours for probate + £3,000 p.a. for trust administration): £90,000 probate + £30,000 over 10 years = £120,000
  • Total 10-year cost: £413,000 (bank) vs. £120,000 (solicitor). The bank’s ongoing percentage fee makes it dramatically more expensive for large, long-duration trusts.

These cases demonstrate that no single provider is always cheaper; the choice depends on estate complexity, asset types, and duration of administration.

Practical Steps for Comparing Professional Executor Quotes

When evaluating professional executor options, beneficiaries and testators should request a detailed fee schedule in writing before appointing any provider. The following checklist can help standardise comparisons:

  • Initial probate fee: Is it a flat percentage, a fixed fee, or hourly? What is the minimum fee?
  • VAT treatment: Are fees quoted inclusive or exclusive of VAT (currently 20%)?
  • Disbursements: Are costs such as court fees, valuation fees, and advertising charges passed on at cost or with a mark-up?
  • Property sale: Is there an additional charge for selling property (e.g., 0.5%–1% of sale price)?
  • Ongoing trust administration: What is the annual charge for managing a trust? Is it a percentage of assets or a fixed fee?
  • Cross-border work: Is there a surcharge for foreign assets, and does the provider have in-house expertise or use external agents?
  • Termination: Can the executor be removed, and what are the exit fees?

The Law Society recommends that testators discuss executor fees with their will-drafting solicitor at the time the will is prepared, rather than leaving the decision to the executor after death [Law Society, 2023, Wills and Inheritance Planning Guide]. For estates with assets in multiple jurisdictions, families may consider using a third-party service to handle cross-border payments and currency conversions efficiently. For example, some international families use channels like Airwallex global account to manage multi-currency distributions from a UK estate to beneficiaries abroad, reducing FX costs compared to traditional bank transfers.

Regulatory Protections and Complaints Procedures

Professional executors in the UK are regulated by different bodies depending on their profession. Solicitors are regulated by the Solicitors Regulation Authority (SRA), which requires them to maintain professional indemnity insurance and to follow the SRA Code of Conduct. Banks offering executor services are regulated by the Financial Conduct Authority (FCA) and must comply with the FCA’s Consumer Duty rules, which require fair value and clear communication of fees.

If a beneficiary believes that executor fees are excessive or unreasonable, they have several avenues for redress:

  • For solicitors: Complain to the firm’s complaints partner, then to the Legal Ombudsman (LeO), which can award compensation up to £50,000.
  • For banks: Complain to the bank’s customer relations team, then to the Financial Ombudsman Service (FOS), which can award compensation up to £430,000 (2024 limit).
  • For all executors: Beneficiaries can apply to the Probate Registry for an order requiring the executor to provide an account of their fees and to justify their reasonableness under the Trustee Act 2000.

The FCA reported that in 2023, it received 1,847 complaints about executor and estate administration services from banks, with 34% of those complaints upheld in favour of the consumer [FCA, 2024, Complaints Data: Wealth Management and Private Banking]. Beneficiaries should not hesitate to challenge fees that appear disproportionate to the work performed.

FAQ

Q1: Can I challenge a bank’s executor fee if I think it is too high?

Yes. You can request a detailed breakdown of the time spent and work done from the bank’s executor services team. If you remain unsatisfied, you can escalate your complaint to the Financial Ombudsman Service (FOS). The FOS can uphold complaints if the fee is deemed disproportionate to the estate’s complexity or if the bank failed to explain the charging structure clearly before appointment. In 2023, the FOS upheld 34% of executor fee complaints and awarded an average of £3,200 in redress per case [FCA, 2024, Complaints Data].

Q2: Are professional executor fees deductible for inheritance tax purposes?

Yes, professional fees for administering an estate—including executor fees charged by banks, solicitors, and licensed probate practitioners—are deductible from the estate’s gross value when calculating IHT, provided they are necessarily incurred and reasonable in amount. This deduction can reduce the IHT liability by up to 40% of the fee amount. For a £30,000 executor fee, the IHT saving would be £12,000, making the net cost to beneficiaries £18,000. HMRC’s Inheritance Tax Manual (IHTM28011) provides detailed guidance on allowable deductions [HMRC, 2024, IHT Manual].

Q3: What is the typical fee range for a solicitor acting as executor for a £1 million estate?

For a straightforward £1 million estate with a single property and no business assets, a regional solicitor typically charges between £8,000 and £15,000 plus VAT (based on 40–60 hours at £200–£250 per hour). A London-based solicitor would charge £12,000 to £24,000 plus VAT (40–60 hours at £300–£400 per hour). Fixed-fee probate packages for estates under £2 million range from £4,000 to £12,000 plus VAT, but these often exclude IHT account preparation and property sales. Always request a written estimate before appointing a solicitor as executor.

References

  • ONS, 2023, Probate and Inheritance Tax Statistics, England and Wales, 2022
  • Law Society of England and Wales, 2023, Probate Practice Update and Wills and Inheritance Planning Guide
  • HMRC, 2024, Inheritance Tax Manual (IHTM28011)
  • Financial Conduct Authority, 2024, Complaints Data: Wealth Management and Private Banking, 2023