About to receive an inheritance, what is the best way to maximise this gift and minimize tax

dsandoreo

HI all

First off I'm not sure if this is posted in the right place, apologies if not.

So me (50M) am due to receive about 200K+ in inheritance this year.

What to do?

The cat is gonna get a big fish to celebrate

• I have:
• No debts (Well £600 on CC till its paid off next month)
• No Family
• Have about 6 months emergency fund
• I currently do no own a property, and live in a rental.

Buying a property seems to be the obvious thing to do, it is what mum would have wanted for me - security.

I am concerned about protection and tax on what will happen till I decided what to do with the money.

I believe I am covered for 6 months under some windfall legislation or amounts up unto a million. I seem to remember hearing Martin Lewis talk about it once.

So is the best thing to just smack it in the Marcus account or similar?

However i am concerned about paying taxes I don't need to on this amount, whilst i work out what to do with it.

HELP

ds 

UPDATE

After reading some of  the comments, i think i need to add some clarification.

This is all new territory to me, largely living more 'hand to mouth' on around minimum wage jobs up to now, so I'm not very clued up, i also find a lot of the Gov website to have lots of information, but it also being a little hard to digest.

I may just be thick!


ANYWAY


1) I am working full time, with a part time side job. Currently 35K FT, then around £16K on the side job. I heavily salary sacrifice on the full-time job at 30-33% (basically as much as i can),  as my pension is not great, but getting better.

The part time job I will have to self asses for, the full time is PAYE

This may change in the New year to 45K FT and 18K PT as / if i move employer (looking very likely, already doing some work for them), So the FT and the PT would be with the same employer, doing different roles. I would be on a standard salary for the FT and invoice for the PT


2) I am not looking to avoid tax, i am looking to minimise what i have to pay. Tax is good it pays for social services, which (in theory) make society better. Some of the implementation of the spending is not so great.... one of the reasons why we have elections.

Basically, I don't want the money to erode away, I don't want to pay anything i don't have to and likewise if i can grow it some, that would be great.

If i put it in the Marcus account i would get around 8K interest a year, i know tax free limit is 1k (i think).

So if i did that would i only pay tax on the other 7k of interest?

3) I live in the West Midlands, currently Worcestershire, which is great for the cat as he has lots of fields to play in. I would more than likely stay around here whilst he is alive.

Dazed_and_C0nfused

dsandoreo said:

HI all

First off I'm not sure if this is posted in the right place, apologies if not.

So me (50M) am due to receive about 200K+ in inheritance this year.

What to do?

The cat is gonna get a big fish to celebrate

• I have:
• No debts (Well £600 on CC till its paid off next month)
• No Family
• Have about 6 months emergency fund
• I currently do no own a property, and live in a rental.

Buying a property seems to be the obvious thing to do, it is what mum would have wanted for me - security.

I am concerned about protection and tax on what will happen till I decided what to do with the money.

I believe I am covered for 6 months under some windfall legislation or amounts up unto a million. I seem to remember hearing Martin Lewis talk about it once.

So is the best thing to just smack it in the Marcus account or similar?

However i am concerned about paying taxes I don;t need to on this amount whilst i work out what to do with it.

HELP

ds 

Minimising tax is very simple, just stick it under your mattress or put in a non interest paying current account.

But most people want the best net return, minimising tax is a very strange choice for someone using this website!

If you have a strong aversion to paying tax then using a non interest paying account to gradually feed the money into cash ISA's would at least get you some (tax exempt) interest.

Non ISA accounts often pay a slightly higher rate of interest but the tax consequences are Impossible to say without knowing what other taxable income you have in the tax year(s) you would receive taxable interest.

Some people can have nearly £20k in taxable interest without paying tax on it.  Others would pay tax on all taxable interest, even just £1.

Albermarle

Normally a savings account is covered by FSCS scheme up to £85K if the provider goes bust.
You are right there is shorter term cover for larger amounts , and inheritance is mentioned .
Temporary high balances | Check your money is protected | FSCS
However after 6 months you will need to spread the money around at least three different providers to be safe.

How much tax you will have to pay on the interest depends on your situation. Are you in employment/have other taxable income? If so what is the total? 

Keep_pedalling

Why worry about tax? You will only pay any if enough income from it. What is your current annual income? If it is below £17,570 you can make use of the starter savings rate.

Brie

You could chuck some of it into premium bonds.  No interest (currently) to pay on winnings and you might end up being able to afford a mansion rather than a small flat.  

I would also suggest you join me and my conundrum and get a will if you don't have one already.  What will happen to what's left after I (& the OH as that's the only dreadfully close family I have) pop off is beginning to niggle.  Do we want things to go to distant cousins and other relatives that have enough already?

dsandoreo

Brie said:

You could chuck some of it into premium bonds.  No interest (currently) to pay on winnings and you might end up being able to afford a mansion rather than a small flat.  

I would also suggest you join me and my conundrum and get a will if you don't have one already.  What will happen to what's left after I (& the OH as that's the only dreadfully close family I have) pop off is beginning to niggle.  Do we want things to go to distant cousins and other relatives that have enough already?

The will is also something to sort out, i am aware thanks 

Brie

Can I also add that I'm pleased that the top of your priorities is to ensure your cat has a big fish?  I hope your cat appreciates it though I suspect there will be little thanks other than to sit about cleaning it's whiskers after the feast.

Albermarle

OP,
If you are reluctant to divulge your income ( although the forum is totally anonymous) then all you need to say is something approx.
None?
Below £17750
Between £18750 and £50,000
Above £50K
Then we can say how much tax you could have to pay.

theoretica

One way to remove the concern of tax on interest is to move ahead with buying a property.  Starting research now on whether you want to do this and what you could buy might shorten the length of time you have this money as cash.

Dazed_and_C0nfused

If i put it in the Marcus account i would get around 8K interest a year, i know tax free limit is 1k (i think).
So if i did that would i only pay tax on the other 7k of interest?

Assuming it's not an ISA then all of the interest is taxable, there is no tax free limit for non ISA interest.

On your current earnings you are some way off being a higher rate payer, even with £8k of interest.

So the first £1,000 would be taxed at 0% and the rest at 20%.

But with your potential change of circumstances that is likely to become £500 taxed at 0% and the rest at 40%.  Although if you agree a much lower salary in return for extra employer employer pension contributions you could remain a basic rate payer.  But the full £8k interest is part of your taxable income and used to determine if you are a higher rate payer or not.  Then the £500/£1,000 is applied after that.

KittenChops

Brie said:

Can I also add that I'm pleased that the top of your priorities is to ensure your cat has a big fish?  I hope your cat appreciates it though I suspect there will be little thanks other than to sit about cleaning it's whiskers after the feast.

Me too!