How to Invest Your Inheritance

In 2020/21, the statistics showed that the value of all UK IHT receipts reached a new high of £5.32 billion. This was up from £5.12 billion during the previous year, while the sum has risen steadily since 2011.

This offers an insight into the amount of capital being inherited by beneficiaries every single year, with some earning significant windfalls after large estates have been distributed.

But how can you successfully invest your inheritance in the UK? Here are some ideas to keep in mind:

#1. Consider an Inheritance Advance to Help Plug Any Gaps in Income

Not only are inheritance funds taxed before they leave the benefactor’s estate, but it can also take up to 12 months for this money to land in your account.

Such delays may leave you without capital or a viable stream of income for a period, so you may want to consider taking out an inheritance advance to help fund your lifestyle.

This type of advanced lending is beneficial as it creates manageable and short-term debt, which can quickly be repaid just as soon as your inheritance has been received.

#2. Pay Off Your Debts

In terms of committing your inheritance funds wisely, you may want to consider using the capital to pay down existing debts.

We’d certainly recommend reviewing your credit score and prioritising targeted debts, particularly those that carry high rates of interest and drive repayments far above and beyond the principal amount.

#3. Create a Diversified Investment Portfolio

For those of you with slightly larger inheritance sums, you may leverage this capital to help create and pursue additional streams of passive income.

You can also choose assets that suit your philosophy and outlook as an investor, from long-term, buy-and-hold options like equities to speculative derivatives such as forex.

The key is to start small and scale your investment portfolio over time, as you gradually look to diversify your interests and minimise exposure to individual market risks.

#4. Start or Develop a Business

Earning a lump sum of inheritance cash certainly enables you to pursue any number of commercial dreams, particularly if you’re entrepreneurial by nature and have considered launching or expanding a business venture.

Much depends on the scope of your business venture and its startup costs, of course, while you’ll need to prioritise strategic aspects of the company such as marketing strategies, recruitment and optimising sales conversions.

Certainly, an inheritance payment can be used to build and grow your existing business venture, often quicker than would otherwise have been possible.

#5. Don’t Spend Your Inheritance Too Quickly

Ultimately, the 12-month period in which your inheritance is taxed and paid can be something of a God send.

The reason for this is simple; as this affords you time to process your grief and sense of loss and enables you to make informed decisions about how to deploy your windfall.

Without this time, there’s a risk that you may spend recklessly or without the requisite thought, causing you to squander the cash and an immense opportunity to improve your life.