Many of us will receive an inheritance at some point in our lives, sometimes expected, sometimes not.
If it comes as a cash lump sum, it’s usually simple. . In most cases, there’s no tax to pay on the amount you receive, because inheritance tax is typically paid by the estate of the person who passed away, not by the beneficiaries. As long as the total value of the estate is below the inheritance tax threshold, currently £325,000 in the UK, the inheritance is completely tax-free. Even if the estate exceeds this threshold, any tax due is settled before the money reaches you, meaning you’re free to use the funds as you wish.
Things can become more complex, however, if what you inherit isn’t cash, but property or investments.
Inheriting Property or Investments
If you’ve been left a property, you can sell it, live in it, or let it out. Just be aware that Capital Gains Tax (CGT) could apply if the property rises in value, and rental income is taxable. Rental income will be subject to income tax.
But what if your inheritance comes in the form of shares, bonds, funds or ISAs?
If you’ve never dealt with investments before, it can feel daunting, and it’s natural to wonder about tax, timing, and what to do next.
What Happens When You Inherit Investments
When you inherit investments, there’s no Inheritance Tax for you to pay directly. The executors of the estate will have already dealt with any tax due before the assets are transferred to you.
That process can take time, sometimes up to 18 months, while paperwork and probate are completed. The executors or legal representatives will arrange for the investments to be registered in your name, and you’ll usually need to provide ID, address details and your National Insurance number.
Once everything is transferred, the next decision is yours:
Do you sell, hold, or pass them on?
If You Decide to Sell
You can sell inherited investments through the registrar or an online investment platform. Costs vary, but online options are often cheaper and quicker.
While there’s no income tax or Capital Gains Tax (CGT) due when you inherit, CGT may apply when you sell if the value has increased since the date of death.
For the 2025/26 tax year, your CGT allowance is £3,000. Any gains above that are taxed at 18% and 24%, depending on your income.
If you’re planning to sell larger holdings, you might save tax by spreading sales over several years to make use of multiple annual allowances.
If You Choose to Stay Invested
Selling isn’t your only option. You may prefer to keep the investments and benefit from potential growth or income.
This could be a smart way to make your inheritance work harder for you, particularly if you already have other investments or longer-term goals in mind.
However, it’s important to check that the portfolio you’ve inherited suits your objectives, appetite for risk and tax position.
What worked for the previous owner might not be right for you.
An adviser can help review the holdings and create a strategy that aligns them with your own financial plan.
Passing Wealth On
If you don’t need the money or want to reduce the size of your own estate for Inheritance Tax purposes, you could pass some or all of the assets on using a Deed of Variation.
This legal document, drawn up by a solicitor, allows you to redirect an inheritance, for example, to children or grandchildren. It can be a powerful way to help the next generation, but professional guidance is essential before making changes.
Getting the most suitable Support
Inheriting investments can be both a gift and a responsibility.
Whether you decide to keep, sell or pass them on, taking time to understand the options, and getting expert advice, can make a significant difference to your long-term financial outcome.
At Continuum, we can help you understand exactly what you’ve inherited, how it fits with your goals, and how to help make it work for your future.
If you’ve recently been left investments, speak to one of our advisers, we will help you make informed decisions with confidence.
How Inheritance Tax works: thresholds, rules and allowances: Overview – GOV.UK
Inheritance tax: thresholds for 2025/26 – MoneySavingExpert
The information contained in this article is based on the opinion of Continuum and does not constitute advice on a suitable taxation strategy or investment strategy, you should seek independent financial advice before embarking on any course of action
The value and returns of an investment are not guaranteed, investors may lose some or all of their investment. When investing Capital is at risk
Levels and basis of reliefs from taxation are subject to change and their value depends upon your personal circumstances. We recommend that the investor seeks professional advice on personal taxation matters
We recommend that you seek professional advice on personal taxation matters.
The Financial Conduct Authority does not regulate taxation and trust advice or will writing.
