Is your UK inheritance windfall ‘free’?

If, as a UK resident, you are fortunate enough to receive a substantial inheritance is the money ‘free’?  Whether from within the UK or abroad, there may be an impact to you.

The tax law of the UK prevails.  Here is the lowdown on your new found wealth.

If a UK domicile has left you a gift, then the benefactors estate will pay Inheritance Tax before any distributions to beneficiaries.

The capital you will receive will not be taxable in the UK but any income you earn from it such as deposit interest will.  You will need to pay income tax on any interest arising.  Therefore, if the inheritance is £1000 capital and £100 income then only the £100 is subject to UK income tax.  This situation may occur during the administration of the estate.

If you are expecting a large sum of money, lucky you!  You should tell your intended depositing bank in advance.  Internationally, all financial institutions must comply with money laundering regulations so any evidence you have of the source of any large deposits will assist.

Once deposited and your obligations are met, you need to plan ahead.  You received this good fortune, who gets it when you die?  Time to write a will!