Inheritance - tax to pay?

Jet

I'm currently a single parent on a low income and claiming working and child tax credits. I pay tax at 22%.

I'm due to receive an inheritance of between 10k and 15k. I intend to pay the lump sum off my mortgage.

Am I going to be liable for any tax to pay and also (I have also asked this on the benefits board) will it affect my tax credits?

hopon

As long as the estate that the inheritance has come from wasn't over 285k then there wouldn't be any iht. If any was due it would normally get sorted out before being distributed to the recipients.

The benefits question is another matter .

kennyboy66_2

Inheritance tax is due on the estate and is paid over by the person appointed to handle the dead persons estate.

So you will not be liable for tax on what you recieve.

I think working and child tax credits are income means tested - so it does not matter if you have savings. (you may want to check this on the benefits board)

Income support is however is dependent on savings (>16k).

Gold_Shogun

Jet wrote: »

I'm currently a single parent on a low income and claiming working and child tax credits. I pay tax at 22%.

I'm due to receive an inheritance of between 10k and 15k. I intend to pay the lump sum off my mortgage.

Am I going to be liable for any tax to pay and also (I have also asked this on the benefits board) will it affect my tax credits?

Hi Jet,
The other posters are correct when they refer to "savings", and (IIRC) the means-tested level at which a reduction in benefits starts to bite is Circa £6000.

HOWEVER ... IF you immediately (upon receipt) use that inheritance to pay a lump sum off your Mortgage (OR at least enough of it to reduce you back down to less than the means-tested lower limit) ...
... Then that would NOT legally constitute "savings" ---> MERELY a "Reduction of Pre-Existing Debt" (your outstanding Mortgage Debt).

Hope this helps.
Cheers
Bob

lulumoo

OK.. I think I have solved my little problem .. in the form it says "other income" and refers to "money from a deceased person's estate" I have decided that means if you are in the process of being an administrator of an estate and you are getting paid to do it that would count as other income...

So far as inheritance is concerned.. I think therefore it is not counted other than as savings and if you earn over £300 in interest.. have I translated it correctly .. or am I barking up the wrong tree in desperation of thinking I may have to pay back what I have received in tax credits..

Thanks ...

Gold_Shogun

lulumoo wrote: »

OK.. I think I have solved my little problem .. in the form it says "other income" and refers to "money from a deceased person's estate" I have decided that means if you are in the process of being an administrator of an estate and you are getting paid to do it that would count as other income...

So far as inheritance is concerned.. I think therefore it is not counted other than as savings and if you earn over £300 in interest.. have I translated it correctly .. or am I barking up the wrong tree in desperation of thinking I may have to pay back what I have received in tax credits..

You didn't say exactly which form (for what purpose) you were taliking about, but in general terms :-

A) ... If you are filling in a form TODAY, you do NOT have to declare any inheritance you haven't ACTUALLY received (in your hand/bank) as of TODAY ... Future potential amounts of an unknown (exact) amount on some unknown future date is NOT relevant.

... Therefore, the "most appropriate path" is to pay off or reduce the mortgage (as per my earlier post) using the inheritance THE MOMENT you actually receive it "in your hand" ... This way, it never constitutes "savings", merely a "reduction of existing debt".

lulumoo

Hi sorry about the confusion I was talking about the Tax Credits renewal form in which you have to state your income for last years tax etc. I think for Tax Credit purposes it doesn't matter about a threshold for savings as long as you declare any interest earnt over £300.

I think that is right...