Inheritance! Do I have to declare it in my tax return

imphilok
imphilok Posts: 1 Newbie
in Cutting tax
Hello

I hope this is in the right thread.

My wife and I are both self employed.

During the last financial year end 2010 beginning April we recieved an inheritance of approx £23000 cash.

Questions

Does one of us or both of us have to declare this amount in our tax return forms?

My wife also won an out of court settlement from her ex employer.
Does she have to add this to her figures as some form of income on her form?

We also recieve a small amount form tax credits (we have one child).
Do we have to declare this money we recieved to them?

Thanks
imphilok

Comments

  • fengirl_2
    fengirl_2 Posts: 4,530 Forumite
    For income tax purposes, the inheritance and court award are not counted as income, so you dont declare it.
    Someone will be along in a minute to advise you about tax credits.
    £705,000 raised by client groups in the past 18 mths :beer:
  • Cat1
    Cat1 Posts: 128 Forumite
    Tax credits are not taxable income :)
  • System
    System Posts: 178,090 Community Admin
    Photogenic Name Dropper First Post
    Any inheritance tax due on the deceaseds estate would have been taken care of before you and your wife received your money. You only have to declare any interest you make on that £23000 if you invest it outside a tax free wrapper (ISA).

    Tax credit is a non-taxable benefit and doesn't need to be declared.

    I'm not sure about the settlement because it depends on the circumstances
  • John_Pierpoint
    John_Pierpoint Posts: 8,391 Forumite
    First Post First Anniversary
    If the inheritance included income due to the estate after the death, the executor should have given you details on the form R185. The system assumes you have been paid the income as the first slice of the payment made to you.
    If you can reclaim taxed income or are liable for additional rate (40%) tax then you should report these figures to HMRC.
    (If the estate has paid IHT as well as income tax on some of this amount it gets horribly complicated if you want relief from 40% + 20% + 20% tax).
    http://www.hmrc.gov.uk/pdfs/r185.pdf
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