Do I have to pay tax on money I inherited?

Question

My uncle left me a cash sum in his will. I want to know whether I have to declare it and pay tax on it. Is inherited money taxed as income?

Joshua Cook · Accepted Answer

Inherited money is generally not treated as income, so you do not usually pay income tax simply for receiving a cash gift under a will, and you do not normally declare the inheritance itself as income on a tax return. Any inheritance tax that might be due is calculated on the deceased person's estate and dealt with by the executors before the money is paid out to you, rather than being charged to you personally on receipt. That is the reassuring part. What you do need to keep in mind is what happens next. Once the money is yours, any income it then generates is taxable in the normal way, so for example interest earned on the inherited cash once you bank or invest it can be subject to income tax depending on your overall position and allowances.

Grace Carter · Answer

So the short answer is that the cash sum itself is not taxed as your income, but the growth or income it produces afterwards can be. If instead of cash you had inherited an asset like shares or property and later sold it for more than it was worth at the date of death, capital gains tax could apply to the increase. Larger or more complex inheritances, or ones involving trusts, are worth checking with an adviser. This is general information rather than advice on your specific tax position.

Do I have to pay tax on money I inherited?

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