Inherited money: things to think about before you decide

Inherited a sum of money? Why many people pause first, how FSCS protects up to £1.4m for six months, tax on the interest, ISAs and when to get advice.

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Last checked: 14 October 2026. We check this page regularly against official sources.

Receiving an inheritance often comes at a hard time. Money may be the last thing you want to think about, and that’s fine. There is rarely a reason to rush. Many people find it helps to take a “decision pause”: keep the money somewhere safe and accessible first, then decide on the bigger choices once things have settled.

This page covers the cash side: where the money can sit safely, how it’s protected, and how the interest is taxed.

This is general information and guidance, not personal financial advice. ClearRates is not authorised by the FCA to give advice.

Struggling with bills or debts right now? Free, confidential help is available from MoneyHelper’s debt advice locator, StepChange and Citizens Advice. It’s worth talking to them before deciding anything else.

Take a decision pause

While the estate is being sorted out, many people park the money in an easy access account in their own name. That keeps it earning interest without locking it away. A few things to consider:

  • No deadline: apart from the FSCS six-month window below, there is usually no rush to commit the money.
  • Watch for scams: fraudsters target people after a bereavement. Unexpected calls, emails or social media offers about “investing your inheritance” are a warning sign.
  • Keep records: paperwork such as the will, probate documents and payment letters can matter later, including for FSCS claims.

Keep it protected: FSCS and temporary high balances

The FSCS protects deposits up to £120,000 per person, per banking licence (the limit rose from £85,000 on 1 December 2025). Brands that share a licence share that limit.

An inheritance is a qualifying life event for temporary high balance protection. That means the FSCS may protect up to £1.4 million for six months, starting when the money becomes legally yours or is first paid in. Moving it to another account doesn’t restart the clock.

So if you hold more than £120,000 with one banking group, the six months can be a useful window to spread it across separate licences. ClearRates shows the licence holder and a shared-licence tag on every account. See FSCS protection explained.

Check the foundations first

Before choosing accounts, many people look at the basics:

  • Expensive debt: credit cards, overdrafts and loans usually cost more in interest than savings earn. Compare the debt’s APR with the savings AER.
  • Emergency fund: a buffer of about 3 to 6 months of essential spending in easy access, more if you’re self-employed or rely on one income.
  • Short-term plans: money you might need within a year or two, for example a house move or care costs, can be kept separate from longer-term money.

Tax on the interest

Inheritance Tax is a tax on the estate of the person who died. It’s normally handled by the executor or administrator before money is passed on. The standard threshold is £325,000, and the standard rate is 40% on the part above it. This is a complex area, so see GOV.UK or get professional help.

Once the money is yours, interest it earns counts towards your Personal Savings Allowance: £1,000 for basic-rate, £500 for higher-rate and £0 for additional-rate taxpayers. A large balance can use that up quickly. Example numbers only: £100,000 earning 4% would make £4,000 of interest in a year.

  • Cash ISAs: you can pay in up to £20,000 across all ISAs in 2026/27, and the interest is tax-free. From 6 April 2027 the cash ISA limit is due to fall to £12,000 a year for under-65s. Compare cash ISA rates.
  • If your husband, wife or civil partner died: you can inherit their ISA allowance, on top of your own. Ask their ISA provider how this works.

See our Personal Savings Allowance guide.

Match the money to when it may be needed

Once the pause is over, a common approach is to split the money by timeframe:

  • Might need it any time: easy access or notice accounts.
  • Known date within a few years: fixed-rate bonds or fixed cash ISAs. Some people “ladder” fixes so one matures each year.
  • Money for five years or more: over long periods, cash can lose value to inflation. Decisions about investing or pensions are outside what ClearRates covers, and this is where regulated advice is worth considering.

Compare types in easy access vs notice vs fixed.

Inherited property, pensions and investments

These have their own rules on tax, timing and selling. Inherited pensions in particular can be complicated. ClearRates doesn’t give guidance on them. MoneyHelper’s bereavement guides, Pension Wise and a regulated adviser are good places to start.

Work through the steps

What should I do with my savings? goes through bills, a buffer, debt, tax and when you need the money. It is information, not a recommendation. The moment list on that page links back here.

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Written by ClearRates. General information, not personal financial advice. Rates change often, so check the provider’s terms before you apply. ClearRates may earn a commission from some links; this never affects how we rank rates. Last checked 14 Oct 2026.

Sources (all accessed 14 Oct 2026)

Questions

Do I pay Income Tax on an inheritance?

The inheritance itself isn't usually taxed as income. Any Inheritance Tax is normally dealt with by the estate first. Interest the money earns afterwards is taxable savings income, after your allowances.

Is all my inheritance protected if I put it in one bank?

Up to £120,000 per person per banking licence is protected as standard. Temporary high balance protection may cover up to £1.4 million for six months from when the money becomes yours. After that, the standard limit applies.

Can I put all of an inheritance in an ISA?

Only up to your annual ISA allowance, which is £20,000 in 2026/27, unless you're inheriting your late spouse's or civil partner's ISA allowance.

How quickly do I need to decide what to do?

There's usually no deadline. Many people park the money in easy access first. The FSCS six-month window is the main date to keep in mind if the sum is above £120,000.

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