What should I do with inheritance money?
We set out where an inheritance could go, with the tax on each option, before anything is moved.
We set out where an inheritance could go, with the tax on each option, before anything is moved.
Inheritance tax is paid by the executors out of the estate before it is shared out, so your share reaches you without a further inheritance tax bill. Where you put it next decides the tax on what it earns: an ISA takes £20,000 a year, a pension up to £60,000 or your earnings if lower, and gifts to your family have their own rules.
The advisers for this subject: Sunny Bharj and Tony Springer
Money you may need within five years does not belong in a pension, and arguably does not belong in the market at all.
A pension, an ISA and a property each carry their own tax rules, and those rules differ from cash.
£20,000 a year into ISAs. Up to £60,000 into a pension, or your earnings if lower, with tax relief at your marginal rate.
The £3,000 annual exemption and gifts out of surplus income leave your estate straight away. Other gifts leave it once you survive seven years.
A surviving spouse or civil partner gets an additional ISA allowance on top of their own, equal to the value in the deceased's ISA at the date of death or when the account is closed.
The couple must have been living together at the date of death, and an ISA manager is not obliged to accept the additional subscription.
£3,000 a year, gifts out of surplus income with no upper limit, and anything to a spouse or civil partner.
Any other gift is a potentially exempt transfer, and it leaves your estate completely if you survive seven years.
Within two years of the death, a deed of variation can pass what you inherited to someone else, treated for inheritance tax as if the person who died had left it to them.
An inheritance can take your estate over the £325,000 nil rate band. Check your will and the expression of wish on each pension you hold.
You can, and 25% normally comes out free of tax. Taking taxable income cuts what you can pay back in to £10,000 a year.
Read the answer →Open a personal pension or join Nest. Contributions get tax relief at your marginal rate, up to £60,000 or your earnings if lower.
Read the answer →A fee or a percentage of the amount invested or transferred. Ask for the charge in pounds before you proceed.
Read the answer →Anything you may need within five years does not belong in a pension.
Not inheritance tax on your share, which the executors pay out of the estate. Income tax can apply to an inherited pension where the person died at 75 or over, and the interest, dividends and gains your inheritance earns from now on are taxed as yours.
Yes, up to your £20,000 allowance for the tax year. A surviving spouse or civil partner also gets an additional allowance equal to the value of the deceased's ISA.
It depends on the rate you pay, any early repayment charge, and how much you want to keep within reach. Check the charge with your lender first.
Yes. Up to £3,000 a year is exempt immediately, and there is no limit on gifts out of surplus income where the conditions are met. Anything else leaves your estate provided you survive seven years.
Bring the estate paperwork to the first conversation: what you received, in what form, and when.
Independent Financial Adviser
Independent Financial Adviser
Your first call is with an Account Manager and is at no cost to you. Tell us what is on your mind: a pension you have lost track of, a fixed rate ending, a will you keep meaning to write.