Insurance payout

Terri2275

My husband was diagnosed with cancer 2 years ago but in October was advised that he had days, months to live.  He was able to redeem his life Insurance early which was in trust with me as the beneficiary.  I know I do not need to pay tax on that but now that my husband has died and it has become my savings as such, will I have to pay tax on it? How will I know what tax to pay?  I am a higher rate tax payer, just, and have to do self assessment for the Family Allowance.  Obviously because of the Covid situation I have also not been able to discuss any investment plans & it is sitting in various Savings accounts which are not earning much interest anyways. 

Malthusian

Sorry for your loss. Claiming the terminal illness benefit meant that it became liable to Inheritance Tax. The fact that it was written in trust is irrelevant as the proceeds were paid directly to him rather than the trust.

No Inheritance Tax is due on money left to spouses.

His estate would only have to pay Inheritance Tax if he left more than £350,000 to people other than you. (Gifts in the past 14 years may also come into it but I'll stop there because there's every chance none of this is relevant to you.)

xylophone

it has become my savings as such, will I have to pay tax on it? 

I am a higher rate tax payer, just, and have to do self assessment for the Family Allowance.

See

https://www.gov.uk/apply-tax-free-interest-on-savings

If you complete a Self Assessment tax return, report any interest earned on savings there.

MobileSaver

Terri2275 said:

it has become my savings as such, will I have to pay tax on it? How will I know what tax to pay?  I am a higher rate tax payer, just, and have to do self assessment for the Family Allowance. 

You do not have to pay tax on your savings, only on any interest earned on those savings (which I am guessing will not be very much in recent times!)

lisyloo

I believe higher rate taxpayers can earn £500 during a tax year without paying interest, the rest of the interest would be subject to 40% tax which would be your responsibility to pay e.g. via self assesment

badger09

lisyloo said:

I believe higher rate taxpayers can earn £500 during a tax year without paying interest, the rest of the interest would be subject to 40% tax which would be your responsibility to pay e.g. via self assesment

Think you mean tax

lisyloo

Yes I meant income tax, thanks