Easy access savings accountsshould therefore be your first port of call, but keep a lookout for access and investment restrictions, as some only allow a certain number of withdrawals and others have relatively low maximum investment limits, which may not be suitable for those with a large windfall. This largely depends on your circumstances and what you intend to do with the money, but at the outset, it’s a good idea to keep the sum in an accessible savings account while you decide what to do next. Many people like to help younger family members onto the housing ladder, for example, or gift some to charity this may also require professional input so you’re not breaching any gifting rules or tax brackets, so again, it’s always worth speaking to an adviser.Īfter your other potential obligations are taken care of, it all comes down to making your money work as hard as possible, but deciding how to do that – and where to put it – isn’t always easy. You might like to consider who else could benefit from your new-found windfall, too, particularly if you’ve got a very large sum. It may not be the most exciting of ways to spend an inheritance, but knowing you don’t have any lingering debt to worry about can be invaluable. Using inheritance money to clear any personal debt you may have can be a very wise move, such as paying off maxed-out credit cards or even mortgage balances (see below). This can be a very personal decision, but there are a few things you may want to focus on. It’s worth pointing out that heirs rarely pay for IHT directly it’s usually discounted from the value of the estate and is taken care of by the executors (unless the estate can’t or won’t cover the full amount, in which case the beneficiaries are liable). This rises to £1m if the estate includes property, as per the property transfer allowance. This means that, provided the first spouse to die didn’t gift a large amount away beforehand, couples can pass on up to £650,000 to beneficiaries tax-free. ![]() Married couples and civil partners can pass on their allowance to their spouse, too. If the beneficiary inheriting the home is a child or grandchild, and the total estate is worth less than £2 million, an additional £175,000 allowance applies, increasing the threshold to £500,000. This means only the value of an estate above this level will be taxed at 40%, and if it’s worth less than this, there’ll be no tax for beneficiaries to pay. The tax-free IHT allowance for 2023/24 – known as the nil rate band – stands at £325,000. However, inheritance tax (IHT) can be legally reduced or avoided in a number of ways (such as via gifting), and will only be paid on estates worth above a certain amount. ![]() Under current rules, heirs could be subject to a tax bill of up to 40% on an estate, which includes any savings, property and any additional assets, after deducting any debts and funeral costs.
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