Budget 2015: Inheritance tax threshold to rise

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Leaked documents from the upcoming 2015 Budget have shown that the threshold for inheritance tax (IHT) is set to rise for the first time since 2009.

The documents, seen by the guardian, showed that the increase would put the IHT threshold up to £1m.

Insurers have been rolling out products aimed at making it easier to administer trusts for life insurance payouts, which avoid the money being counted as part of the inheritance and taxed at 40%.

Legal & General launched an online hub to administer trusts, while Aegon launched a whole of life product with an integrated trust option.

Currently the rate of IHT is £325,000 and £650,000 for married couples.

Rachael Griffin, financial planning expert, Old Mutual Wealth: "The proposed rise in the IHT level is a welcomed move. The IHT band was frozen at £325,000 back in April 2009.

"Since then, average house prices have risen by 20.3%, making the current IHT threshold vastly out of date with current property prices, leading to more families being caught by IHT.

"If IHT had kept pace with house price inflation, the £650,000 joint IHT allowance would stand at £781,950* today, so this proposed move to £1m would be a progressive move.

"The full details of the proposal are yet to be thought through, but having a separate property IHT exemption could make estate planning more confusing."

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