Receiving an Inheritance: What to Do

Do you pay tax when you receive an inheritance?

Usually not at the point you receive it. GOV.UK states that you do not normally owe any tax on an inheritance at the time you inherit it, because the estate deals with inheritance tax first (gov.uk, as at July 2026, subject to change). Many estates pay no inheritance tax at all, as nothing is due where the estate is within the £325,000 nil-rate band or everything above it passes to a spouse, civil partner or charity (gov.uk/inheritance-tax, as at July 2026, subject to change).

Who actually pays the inheritance tax?

The personal representative, meaning the executor named in the will or the administrator where there is no will, is responsible for paying any inheritance tax due out of the estate before beneficiaries receive their share (gov.uk, as at July 2026, subject to change). In limited situations HMRC may look to a beneficiary, for example where you received a gift from the deceased within seven years of death and tax on it is unpaid.

Question	General position (July 2026)
Is there tax just for inheriting?	Not usually; the estate settles inheritance tax first.
Who pays inheritance tax?	The executor or administrator, from the estate.
Standard inheritance tax rate	40% on the estate above the available bands (36% where 10%+ passes to charity).
Tax if you later sell an asset?	Capital gains tax may apply on any increase in value since the death.

Question

General position (July 2026)

Is there tax just for inheriting?

Not usually; the estate settles inheritance tax first.

Who pays inheritance tax?

The executor or administrator, from the estate.

Standard inheritance tax rate

40% on the estate above the available bands (36% where 10%+ passes to charity).

Tax if you later sell an asset?

Capital gains tax may apply on any increase in value since the death.

Sources: gov.uk, tax on what you inherit and gov.uk/inheritance-tax, as at July 2026 and subject to change. See our guide to distributing an estate for how and when beneficiaries are paid.

Tax after you inherit: income and capital gains

Although receiving an inheritance is not usually taxed, what you do with it afterwards can be. GOV.UK explains that you may owe income tax on money the inheritance later earns, such as dividends on inherited shares or rent from an inherited property, and capital gains tax when you sell something you inherited that has risen in value since the date of death (gov.uk, tax on money and shares you inherit, as at July 2026, subject to change). These are separate from inheritance tax and depend on your own circumstances.

A worked example (illustration only). Priya inherits £40,000 in cash and a parcel of shares from her late uncle's estate. The executor had already paid any inheritance tax due before distribution, so Priya pays nothing simply for receiving the £40,000 (gov.uk, as at July 2026, subject to change). A year later she sells the shares, which have risen in value since her uncle died, and capital gains tax may then apply to that increase (gov.uk, money and shares, as at July 2026, subject to change). Change the assets, the timing or her other income and the position changes, so this is general information rather than a calculation for any real person.

How an inheritance affects benefits and care

An inheritance counts as capital, so it can reduce or stop means-tested benefits once your savings pass the thresholds. For Universal Credit, savings below £6,000 do not affect the award, amounts between £6,000 and £16,000 reduce it by £4.35 for every £250, and usually you cannot claim with more than £16,000 (gov.uk, Universal Credit money, savings and investments, as at July 2026, subject to change). Other benefits and social-care means tests have their own rules, so it can be worth checking each.

Deliberately giving the money away to keep benefits or reduce a care-fees assessment can backfire. Where someone knowingly reduces their capital to increase a benefit, it can be treated as deprivation of capital and assessed as though they still held it, known as notional capital (gov.uk, as at July 2026, subject to change). Local authorities apply comparable deprivation-of-assets rules to care funding, so passing an inheritance on is one option some consider only after taking advice, focused on limiting the impact of care fees rather than deliberately avoiding them.

Capital counts. A lump sum sits alongside your existing savings when benefits are worked out.

Timing matters. Spending on reasonable things is treated differently from giving money away to stay eligible.

Care assessments differ. Deprivation-of-assets rules can look back at gifts made to reduce a care contribution.

If benefits or care funding are in the picture, many people take advice from a benefits specialist or the local authority, and consider our note on distributing an estate. Source: gov.uk, as at July 2026, subject to change.

Redirecting what you inherit

If you would rather the inheritance went to someone else, for example your children or a charity, it can sometimes be redirected using a deed of variation. Any change to how the estate passes must be made within two years of the death, and every beneficiary left worse off has to agree (gov.uk, changing a will after a death, as at July 2026, subject to change).

A variation can, depending on circumstances, change the inheritance tax or capital gains tax picture for the estate, and HMRC must be told within six months where it increases the tax due (gov.uk, as at July 2026, subject to change). It is one option some people consider, but the rules are technical, so it can be worth discussing with a solicitor or a STEP practitioner first.

See our note on the deed of variation for how redirecting an inheritance works in practice.

Receiving an inheritance in Scotland and Northern Ireland

Inheritance tax is a UK-wide tax, so the £325,000 nil-rate band and the 40% rate apply across England, Wales, Scotland and Northern Ireland alike, and in each nation the estate normally settles any tax before beneficiaries are paid (gov.uk, as at July 2026, subject to change). The surrounding law differs. Scotland has its own succession rules, including legal rights that can give a spouse and children a fixed share, and uses confirmation rather than a grant of probate. Where an estate touches more than one UK nation, it can be worth taking local advice. For the wider picture, see What Is Probate?

Frequently asked questions

Do I have to pay tax on money I inherit?

Usually not at the point you receive it. GOV.UK states you do not normally owe tax on an inheritance at the time you inherit, because the estate settles any inheritance tax first (gov.uk, as at July 2026, subject to change). You may owe income or capital gains tax later if the money earns income or you sell an asset that has gained in value.

How much can you inherit without paying tax?

There is no personal allowance for inheriting; the tax sits with the estate. An estate generally pays no inheritance tax where it is within the £325,000 nil-rate band, or where everything above that passes to a spouse, civil partner or charity (gov.uk, as at July 2026, subject to change). Above the bands, 40% applies to the excess, so what you receive depends on the whole estate.

Will an inheritance affect my benefits?

It can, because an inheritance counts as capital. For Universal Credit, savings below £6,000 do not affect the award, £6,000 to £16,000 reduce it, and over £16,000 usually stops it (gov.uk, as at July 2026, subject to change). Other means-tested benefits and care assessments have their own limits, so many people check each before spending.

Can I refuse or redirect an inheritance?

Often yes. An inheritance can be redirected to someone else using a deed of variation, provided it is done within two years of the death and any beneficiary left worse off agrees (gov.uk, as at July 2026, subject to change). Because it can change the tax position, one option some consider is discussing it with a solicitor or STEP practitioner first.

Do I pay capital gains tax on inherited property?

Not on inheriting it. Capital gains tax can apply when you later sell an inherited asset that has risen in value since the date of death, rather than at the moment you inherit (gov.uk, money and shares you inherit, as at July 2026, subject to change). The gain is generally measured from the value at death, so keeping a record of that value can help.

How long does it take to receive an inheritance?

It varies with the estate. Executors often wait before distributing, as they must pay debts and any tax first, and simple estates can still take several months while more complex ones take longer. There is no single fixed timescale (gov.uk, distributing the estate, as at July 2026, subject to change). Our guide to distributing an estate explains the usual order.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.