Step zero: park it and breathe

The single most common inheritance mistake isn't a bad investment — it's a fast one. Money decisions made inside grief, under family pressure, or to "do something" are reliably worse than slow ones. The first move is to park the money safely and deliberately do nothing for a few months:

  • FSCS protection covers £85,000 per person per banking licence — and, usefully, temporary high balances (which inheritances explicitly are) get protection up to £1 million for six months. Spreading across institutions after that window matters.
  • Use easy-access or short fixed-term savings. The "lost" growth of six careful months is noise over a lifetime; a rushed mistake isn't.

The order of operations

  1. Confirm what you've actually received. Estate administration handles inheritance tax before distribution — receiving an inheritance is not itself taxable for you (income the money later earns is). If you're the executor too, those are different jobs; take them separately.
  2. Clear expensive debt. Credit cards and high-rate loans first — a guaranteed, tax-free return no market matches.
  3. Fill the foundations. Emergency fund to your target (calculator), then high-interest-debt-free, then secure the basics like protection if people depend on you.
  4. Use the tax-advantaged spaces, multi-year. ISA allowance (£20,000 per tax year) and pension contributions (within the annual allowance and your earnings) can shelter a large inheritance over several tax years rather than one rushed one. The gap between sheltered and unsheltered compounds for decades.
  5. Only then: the investing question. By this point the decision is smaller and calmer — see investing basics for the concepts, and consider whether the remaining sum clears your bar for paid advice.

The vulture window

Probate records are public, and recently bereaved people with money are a targeted demographic — by scammers, and by aggressive salespeople technically inside the rules. Treat every unsolicited approach about your inheritance as hostile until verified: no cold call, email or "friend of the family" recommendation skips the FCA Register checks.

When advice earns its fee here

Six figures, pensions involved, property decisions, your own estate now facing inheritance tax, or simply the feeling of being out of your depth — these are the classic triggers. A fixed-fee, one-off financial plan is often the right-sized purchase (see what advice costs); ongoing management is a separate decision you can make later, not a package deal.

Common questions

Do I pay tax on inherited money in the UK?
Receiving an inheritance isn't taxable income — inheritance tax, if due, is paid by the estate before distribution. What you do next has tax consequences: interest, dividends and gains on the money are taxed normally, which is why moving it into ISAs and pensions over time matters.
Should I pay off my mortgage with an inheritance?
It's the great kitchen-table debate: a guaranteed saving at your mortgage rate versus potentially higher (but uncertain) investment returns, with temperament and tax wrappers in the middle. There's no universal answer — it's a genuinely personal trade-off and a textbook question for a one-off advice session. Run the numbers both ways with the overpay vs invest calculator first.
How long does it take to receive an inheritance?
Probate plus estate administration typically runs months, often six to twelve, longer for complex estates. Use the wait productively: it's the natural cooling-off period in which to read, plan the tax-year strategy, and interview advisers if you'll want one.

Sources and further reading

FSCS — temporary high balances · GOV.UK — applying for probate · MoneyHelper — receiving an inheritance

About this guide: general education only — not regulated advice, legal advice or a personal recommendation, and FinancialAdvisor.co.uk is not an FCA-authorised firm. Rules change and depend on circumstances. For decisions, consult an FCA-authorised adviser and, where relevant, a solicitor.