Whether you have received an inheritance from a loved one or have been named as a beneficiary within a will, you need to think about what comes next, writes by Christian Gardner, financial adviser at True Potential Wealth Management.

While you might initially feel daunted, with the right support, securing your financial future can be a simple and effective process.

At True Potential, we work with you on an individual basis to understand your unique personal circumstances. Getting to grips with Inheritance Tax is the first step.

What is Inheritance Tax?

This is the money paid to HMRC and is dependent on the value of your estate when you die.

The estate is the total value of all your assets, such as properties, savings and investments.

Understanding the rules

Great British Life: It's never too early to start planning your own inheritanceIt's never too early to start planning your own inheritance (Image: True Potential LLP)

Inheritance Tax can seem complicated. However, with the right support, you can unlock your inheritance’s potential.

You only need to pay Inheritance Tax on your estate if it is over a certain threshold -  this is currently £325,000 (tax year 2022/23) available to offset against any assets.

There is also an allowance that can be offset against your main residence, which is called the Residence Nil Rate Band (RNRB).

The RNRB is an allowance that reduces the amount of Inheritance Tax an individual might pay when passing on a qualifying residence to a direct descendent. In the current tax year, the RNRB is £175,000 and is in addition to the Nil Rate Band.

Therefore an individual could pass on up to £500,000 free of Inheritance Tax, or £1m for a married couple.  The standard Inheritance Tax rate is 40%, which is only charged on the part of your estate that is above the threshold.

While inheritances come in all shapes and sizes, there are three common stages you will need to navigate:

Starting the conversation

Great British Life: Understanding your financial situation is vitalUnderstanding your financial situation is vital (Image: True Potential LLP)

While it's not an easy conversation to have, it is vital as forming an open dialogue with your loved ones can prompt them to seek the right advice.
It is never too early, or too late, for them to contemplate their estate and discuss their wishes with you so you’re prepared when the time comes.

Receiving an inheritance

Before you make any decisions, you need to understand your current financial situation. For example, if you have high-interest debts, your inheritance could be a good opportunity to clear them.

Once your financial past has been taken care of, you can start planning your financial future. Speaking to a financial adviser can help you understand the best ways to make your vision a reality.

Organising your own inheritance

Great British Life: Seek out the best possible adviceSeek out the best possible advice (Image: True Potential LLP)

If you have recently received an inheritance, it is a good prompt to get your own affairs in order and consider your own potential Inheritance Tax.

It's never too early to start planning your own inheritance. You will first need to prepare a will to help ensure that your estate passes to your chosen beneficiaries.

Investing in a pension is also a great way to plan for the future and receive an extra boost from the Government. Basic rate taxpayers benefit from a 20% tax top-up on their pension contributions, up to an annual limit, and money held within a pension is outside of your estate for inheritance tax purposes.

Another way to be Inheritance Tax efficient is to leave at least 10% of your estate to charity, if appropriate, as your family may be able to pay a reduced rate of tax.

If you have received an inheritance, are expecting one in the future, or want to chat about your future plans, speak with True Potential Wealth Management, part of the True Potential Group to discuss your unique circumstances.

Visit www.tpllp.com for more information


With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This article is not a personal recommendation or financial advice. Pension eligibility and tax rules apply. Tax is subject to an individual’s personal circumstances, and tax rules can change at any time.