Inheritance and tax and tax credits

clairebear1976

Evening all, hope everyone is well?
Not sure of this is in the right place as it covers a few different sections. I've received some inheritance from my late husbands grandmothers estate. She passed away last September and my sister in law wanted me to have what would have been my late husbands share of the estate. The house sale was completed a few weeks ago and the solicitor (executor of the estate) has released a provisional amount as it's taken so long with the rest being retained to clear off debts and his fees. The plan is to then release the remainder in a few months once everything has been paid that needs to be.
The house has sold for just under £180,000, I've received a first payment of £25,000 last week with the est to come later, probably between £10-15,000.
I currently claim working tax credits as I'm in a part time job due to long term health problems. I've rang HMRC today to tell them (just to be on the safe side). They didn't give me much information but said I should have form R185 from the solicitor showing that any tax has been paid. I've not had this but is this something that I should have when everything is tied up? Am I right in thinking that HMRC are only interested in any interest I am paid on my savings? I'm not going to have this first payment for long because I'd been planning to pay off my mortgage with it but I'm a bit nervous about doing it, I keep thinking something is going to go wrong and someone's going to come looking for money somewhere further down the line!
I don't think it is any where near the threshold for inheritance tax and my employment income of just over £10,000 a year plus interest from the amount left in savings should still be under the personal allowance.
Am I just worrying myself over nothing? It feels a bit like I'm being over cautious and over thinking! If anyone can help and maybe help me think a bit clearer that'd be great! x

poppystar

clairebear1976 wrote: »

I don't think it is any where near the threshold for inheritance tax and my employment income of just over £10,000 a year plus interest from the amount left in savings should still be under the personal allowance.
Am I just worrying myself over nothing? It feels a bit like I'm being over cautious and over thinking! If anyone can help and maybe help me think a bit clearer that'd be great! x

Just to clarify, you wouldn't have to pay inheritance tax that would have been paid by the executors before the money is distributed. Unless you have masses of savings already there would be no tax on the interest on the money when you receive that.

Not sure on how it affects tax credits but am sure someone will be along to help with that soon.

bobthedambuilder

I think the solicitors, if they're doing their job, will have dealt with tax on any interest received by the estate before it was distributed. I was recently executor for an estate which earned interest between the dates of bereavement and distribution, and I had to declare that interest to HMRC as estate income, on which the estate paid income tax at 20%. I didn't receive the R185 form you have mentioned (or at least not yet - all this has happened in the last month or so, so HMRC may just be dragging their feet).

Can't help you with the effect of your bequest on your tax credit situation, sorry.

clairebear1976

Thanks for the replies everyone. I think I was just over thinking things really, been getting myself a bit stressed about receiving this money! I should be enjoying it but it's having the opposite effect. My intention all along was to pay off my mortgage as I've not got a massive amount left. I'm worrying now that there's something that's been missed, that the solicitor has made a mistake somewhere and if I go ahead and pay the mortgage that in a few months someone's going to turn around and say "actually there's been a mistake"! The typical "if something sounds too good to be true it probably is" kind of thinking. If anyone has similar experience of receiving inheritance and paying off a large bill with it it'd be great to hear from you, if only just to settle my mind a little!

Mojisola

clairebear1976 wrote: »

I've received some inheritance from my late husbands grandmothers estate.

She passed away last September and my sister in law wanted me to have what would have been my late husbands share of the estate.

You've got a lovely sister-in-law! There are so many stories about families fighting about inheritance, it's good to hear this one.

As long as you're not receiving any means tested benefits, there shouldn't be any problem putting the money towards the mortgage.