What to do with a lump sum cash windfall

Inheritance, redundancy, business sale, divorce settlement, lottery win... however the money arrived, you're now staring at a sum that could change everything. But where do you start?

Whether it's £30,000 or £3 million, this guide walks you through ten practical steps, roughly in the order most financial advisers recommend tackling them.

The idea is simple: start at step one and keep going until the money runs out or you've built a solid financial foundation.

From paying off expensive debt (which beats most investment returns) to navigating more complex tax-efficient strategies, each step builds on the last. 

Everyone's situation is different, and this isn't personal financial advice, just a research-backed roadmap of 10 steps to make your windfall work harder and last longer.

One thing that might surprise you? Property is quite low down the priority list.

Step one: pause and get perspective

Receiving a large lump sum can be surreal.

One minute, you're checking your bank balance with a familiar sense of dread; the next, there's a six- or seven-figure deposit sitting there, like a cat on the kitchen counter, demanding attention but offering no instructions.

It's a bit like Pip in Great Expectations. Suddenly rich, wildly unprepared, and convinced he needs a top hat.

However the money came to you, the emotional impact can be huge. Relief. Excitement. Guilt. Pressure. Grief. Not exactly the best headspace for making life-changing decisions.

The best thing you can do in the early days is press pause. Give yourself time to breathe and think. In fact, many financial advisers recommend a "cooling off" period of several months before taking any major action.

Where to put the money in the meantime

You don't need to make investment choices straight away. Instead, protect the funds by placing them somewhere secure and accessible:

• High-interest savings account with a reputable UK bank.

• NS&I Premium Bonds or Direct Saver, which are 100% backed by the UK government (though the maximum amount you can hold is £50,000)

• Multiple banks (if over £120,000) to stay within the FSCS protection limit per institution.

This isn't about growing the money or finding the most tax-efficient home for it, yet. It's about making sure it's still there when you're ready to use it.

Give yourself a "decision-free" period to mull over the new possibilities this lump sum unlocks.

Fight the urge to splurge

It's normal for your mind to jump to big-ticket items when money suddenly lands in your lap. Maybe a new car, a generous gift to a loved one, or, if you're anything like Pip, a wardrobe full of new clothes to step out into high society.

The truth is though, your future self may have better ideas. A windfall can disappear quickly if it's spent in haste or scattered too widely.

Sort out the boring (but crucial) stuff first

Depending on how the money came to you, there might be admin or tax points to address. For example:

• Inheritance: Most tax is handled before distribution, but if you're the executor, you may have to oversee probate
• Redundancy: The first £30,000 of certain redundancy payments is tax-free, but anything above is taxed like income
• Business sale or divorce: Check settlement paperwork, asset transfers, or any deadlines for finalising agreements.

If any of this is unclear, or if you're facing pressure from others about what to do, consider booking a consultation with an independent, regulated financial adviser. Sometimes having a professional on your side helps defuse stress and buy breathing room.

Step two: pay off debt (selectively)

Clearing expensive debt is one of the simplest, safest ways to get a guaranteed return, often far higher than you could ever dream of getting on an investment.

It's a guaranteed return that frees up your future income. As a general rule, consider clearing expensive debts (think 10% APR or more) as a priority.

Part 1: round up the suspects. List all your debts and identify the troublemakers. Credit cards, overdrafts, and payday loans.

Part 2: take out the worst offenders first. The longer you leave these ne'er-do-wells on the loose, the more havoc they'll wreak on your finances. 

But what about lower-rate borrowing? Things can get a little more nuanced here.

• Personal loans and car finance: If you're paying 4%–7% and it gives you peace of mind to knock them on the head, it's not a bad idea. Just check for early repayment charges first. Most lenders let you overpay without much hassle; a quick call is all it takes to confirm.

• Student loans probably don't deserve to get thrown in the slammer with the credit card debts. If you're on Plan 2 or 5 then you repay via your payslip, with the unpaid balance written off after 30 years. Unless you earn a very high salary for a long time, you may never repay the full amount – and that's fine. There's not much use in throwing your lump sum at the Student Finance Company when the debt might be written off anyway. Many advisers say to leave it be, unless you're very likely to repay it in full anyway.

• Then there's your mortgage – the elephant in the room. Paying it down now could save you thousands in interest, but whether it's the right move depends on your rate, your goals, and how much risk you're comfortable with. A financial adviser can help weigh it all up, blending numbers with gut feel to land on a decision that suits you.

Step three: build a safety net

Before you start investing or making big plans, cover the basics. An emergency fund acts as your financial fire blanket.

Most experts recommend holding between three to six months of essential expenses in an easy-access savings account. That means rent or mortgage payments, bills, groceries. Basically, the things you can't cut back on (we're not talking about dog grooming subscriptions here).

If your core costs come to £2,000 a month, you're aiming for £6,000 to £12,000. The more unstable your income, the more you'll want to have in your emergency fund. A freelance sculptor, for instance, might need a bigger buffer than someone in a more stable job, like a nurse.

Put the money somewhere safe, like a high-interest savings account, or if you prefer, Premium Bonds.

A few more things to note:

• Inflation matters. Even your emergency fund shouldn't be in a totally dead account. Look for the best easy-access rate you can find, and check it regularly. Some banks drop rates quietly after a few months

• Keep it separate, ideally in its own account, so you’re not tempted to dip in when booking a holiday feels like an emergency

• If you’re claiming benefits, know that savings over £6,000 can reduce entitlements, and over £16,000 may cut you off entirely.

Your emergency fund is about liquidity, not profit. That means no notice periods, no penalties, and no tying up funds in investments that could fall in value. Boring but bulletproof.

Step four: protect yourself

And while you're fortifying your finances, this is also the moment to think seriously about insurance. Now that you've got a lump sum swilling around, you have more to protect, and more reason to make sure you're covered if life throws something nasty your way.

Illness, injury, or a spell off work can wipe out your savings faster than you'd think. Statutory sick pay in the UK is £118.75 a week. That's barely enough to cover food, let alone rent or a mortgage. Income protection, critical illness cover, and life insurance can help plug that gap.

Especially if you're self-employed or have dependants, these policies aren't so much a luxury as a second parachute.

We're partnered with LifeSearch and Heath Protection, a couple of options that shop around to get you a good deal on your behalf – based on the cover you actually need.

Step five: consider your investment strategy

Now you've paid down expensive debts and built a solid financial cushion, it's time to think carefully about how to invest what's left.

First, we're going to look at some investment principles. We'll examine where to invest in the next section.

Two principles reign supreme here: diversification (not putting all your eggs in one basket) and time horizon (when you'll need your money).

Should you invest all at once, or spread it out over time?

You could dive straight in and invest the entire lump sum at once, or take it slow by drip-feeding smaller amounts over time, a strategy known as ‘pound-cost averaging.’

Drip-feeding feels safer. It smooths the ride and can help calm your nerves, especially if markets are rocky. But counterintuitively, it’s often less effective. History and research show that investing a lump sum upfront usually delivers better long-term returns, simply because markets tend to rise over time, and the sooner you're in, the longer your money has to grow.

That said, averages don’t tell the full story. Imagine investing your entire lump sum the day before a sudden market crash, like proudly unveiling your sandcastle just as the tide rolls in.

That’s where your time horizon, liquidity needs, and ability to stomach volatility matter. If you won’t need the money for 10+ years and can ride out the ups and downs, a lump sum may make more sense.

If you’re nervous or might need access sooner, a slower, steadier approach could help you stay invested. And that, in the end, is the most important thing.

A sensible compromise could be to invest half straight away, then drip-feed the remainder over several months. You'll get your money working immediately while keeping some dry powder in reserve if markets dip.

If you want more explanation, we covered this topic in more depth over on YouTube:

Matching investments to your timeline

When allocating investments, your timeline determines how much risk you can sensibly take.

If you'll need cash within five years (say, for a house deposit), you shouldn't invest heavily in volatile stocks.

Cash savings or short-term bonds protect your capital from sudden market downturns, even if inflation slightly nibbles away at their value. This isn't the time for adventurous investing.

Goals five to 10 years out give you more breathing room. You can mix equities (stocks) with bonds and cash. Historically, a balanced approach, say, 50% stocks, 50% safer assets, has typically outpaced inflation without too many sleepless nights. If you prefer some excitement but not a rollercoaster ride, this balanced approach could work nicely.

Long-term goals (ten or more years away) favour stocks.

Over long periods, equities have significantly beaten cash and inflation, despite plenty of stomach-jolting drops along the way. Think of it like slow-roasting a joint of beef versus nuking a frozen pizza: the former takes patience, but you'll probably be glad you waited.

If all of this sounds overwhelming, know that lots of investment products come with ready-made asset allocation options tailored to different timelines and risk levels, often given a number or label to reflect how cautious or adventurous they are (think: “Risk Level 3” or “Balanced Growth Fund”).

Diversity for safety and growth

No matter your timeline, don’t put all your eggs in one basket. Diversifying (spreading your money across global markets, asset types, and sectors) helps reduce risk and smooth returns. Index funds, bonds, and even property investments can work together to grow your wealth without relying on any single winner.

Avoid common investing traps

Finally, beware of behavioural traps. Human brains aren't naturally built for investing. We're prone to panic-sell during downturns (jumping out of a moving car because it's going downhill) and chasing last year's best-performing sectors (buying an umbrella because it rained yesterday).

Professional advice offers a steady hand, helping you stick to your strategy and avoid knee-jerk reactions. Sometimes the best investment is simply paying someone to stop you from sabotaging yourself.

Step six: use tax-efficient wrappers first

Once you've tackled debt, set aside a buffer, and gotten your investing principles clear, the next step is to give your remaining lump sum a proper home. That means using tax wrappers; accounts designed to protect your savings and investments from unnecessary tax. The most widely used are ISAs and pensions.

ISAs: tax-free growth, flexible access

Every UK resident over 18 has an ISA allowance, currently £20,000 per tax year. You can't carry that figure forwards to the next tax year, so use it or lose it.

You can spread your allowance across different ISA types:

• Cash ISAs for savings

• Stocks and shares ISAs for investments

• Lifetime ISAs (LISAs) up to £4,000 a year, with a 25% government bonus

• Innovative finance ISAs for peer-to-peer lending

For most people with a medium- to long-term goal, the stocks & shares ISA is the go-to option.

You can invest in funds, shares, bonds and more, and everything grows free from income tax and capital gains tax, both while it grows and when you take it out.

Cash ISAs offer tax-free interest, but rates are often no better than normal savings accounts. The Personal Savings Allowance means you’re only allowed to earn a certain amount of interest within a savings account before having to pay tax, which is £1,000 for basic rate taxpayers. To hit that limit, you’d need around £20,000 in savings earning 5% interest.

This means that cash ISAs are usually only worth it if you've got a lot of cash or want everything tax-free in one place.

ISAs and large lump sums

One ISA tactic for hefty amounts is to straddle two tax years.

For example, if you receive your lump sum in March, you could invest £20,000 before the 5 April deadline, then another £20,000 after 6 April, sheltering £40,000 in a matter of weeks.

Over time, this builds up. Five years of maxed-out contributions equals £100,000 sheltered; if your partner does the same, it's double that.

If your investments are sitting in a general account, consider the ‘Bed and ISA’ approach: sell them, move the cash into your ISA, and immediately rebuy the investments inside the wrapper. That way, the future growth becomes tax-free. 

Pensions: powerful, but less accessible

A pension offers stronger tax perks than an ISA, but with one major trade-off: you can't touch the money until your late 50s at the earliest (currently 55, rising to 57 in 2028). If you can afford to wait, the advantages are generous.

Contributions receive income tax relief:

• For basic-rate taxpayers, an £8,000 contribution gets topped up to £10,000 automatically. 

• Higher-rate and additional-rate taxpayers can claim back an extra 20-25% through their tax return.

There's no other investment that gives you an instant uplift on day one!

How much can you put into a pension?

The annual limit (called the annual allowance) is usually £60,000 or 100% of your income, whichever is lower.

But if you didn't use your full allowance in any of the past three tax years, you might be able to top it up this year by carrying the unused amounts forward. There's a catch, though: your total contribution still can't be more than what you earn this year.

For example: if you earn £70,000 and have £90,000 of unused allowance from previous years, you could contribute up to £70,000, not the full £90,000. So if you're thinking about putting in a big lump sum, check that your current income is high enough to cover it.

If your income is over £200,000, the rules get stricter.

Your annual limit may be reduced (sometimes dramatically) under something called the tapered allowance. For very high earners, it can fall as low as £10,000. The calculation is fiddly, and it includes things like employer contributions, so it's a good idea to get professional advice before making any decisions.

Money inside a pension grows free of income and capital gains tax. When you access it, 25% can usually be taken out tax-free; the rest is taxed as income. You can often manage withdrawals to stay in lower bands. 

Pairing pensions with ISAs

One smart way to make your money go further is by using pension tax relief to help fund your ISA.

Say you contribute £32,000 to your pension, and your provider claims £8,000 in basic-rate tax relief, bringing the pot to £40,000.

If you're a higher-rate taxpayer, you can then claim back up to another £8,000 through your tax return. That return doesn't go into your pension; it's paid back to you, and you can use it to fund your ISA the following year. In effect, the government helps you build both accounts from the same initial sum.

Step seven: get professional advice

If you've ticked off the basics like clearing your high-interest debts, topping up your savings, and filling your ISA and pension, and you've still got cash sloshing around, then congratulations are in order.

But before you move on to steps seven, eight, and nine in this guide, now's the perfect juncture to consider getting proper, regulated financial advice.

Yes, we know we've said it a million times now. But that's because the complexity and the potential cost of mistakes rise sharply from here. At this stage, the value of good advice can easily outweigh the fee.

What advisers actually do

Suitability checks: they'll make sure the strategy fits your needs and risk profile. For example, just because you can access an Enterprise Investment Scheme doesn't mean you should.

Tax layering: they'll spot opportunities to save tax you might never think of, from using allowances across spouses, harvesting losses, timing income and capital gains, and more.

Behavioural coaching: when markets wobble, you'll want someone to stop you panic-selling your entire portfolio to buy gold and head off in a 4x4 campervan.

Access to better products: some funds and tax-efficient investments are only available through advisers. They'll do due diligence, so you don't end up in some cowboy scheme from a bloke you met on Discord.

Estate planning: they'll help structure your finances so more goes to your family and less to the taxman.

If this is something you're weighing up and you've never done it before, you'll probably want to check out our complete guide to getting financial advice.

Regulated = protected

All proper advisers in the UK are authorised by the FCA. That means they're legally required to act in your best interests. If they get it wrong, you can complain to the Financial Ombudsman, and potentially be compensated.

When advice is worth it

If you're sitting on £50,000 and just want to know how to split it between your ISA, pension, and premium bonds account, then hiring a financial adviser might be overkill. But if your lump sum is six figures or seven figures, then you're probably in territory where advice could make a lot of sense.

Say you're looking at a £500,000 windfall. A good adviser might charge 1% (£5,000). But if they help you avoid a bad investment, dodge a 40% inheritance tax bill, or structure withdrawals in a more tax-efficient way, that could save you tens of thousands of pounds.

It’s worth knowing, though, that you can use the Pension Advice Allowance, which lets workplace pension savers withdraw up to £500 (up to three times) from their pension to help cover the cost of retirement financial advice, without it being treated as a taxable withdrawal.

Step eight: invest outside wrappers (if you must)

If you've already maxed out your ISA and pension allowances but still have money left sitting around like a bored dad at a Taylor Swift concert, it's time to consider a General Investment Account (GIA).

These are your bog-standard taxable brokerage accounts.

GIAs are flexible; you can withdraw whenever you like. But, there’s a couple of things to consider:

• Every penny of interest, dividends, or capital gains is taxable. Interest from bonds or savings in a GIA counts towards your Personal Savings Allowance: up to £1,000 if you're a basic-rate taxpayer, £500 if you're higher-rate, and additional-rate taxpayers get nothing. If you’re on an income below £12,570 from either your work or pension, however, you could also get an extra £5,000 tax-free allowance for savings

• Dividends are even stingier. The allowance is £500 per person. At a 5% yield, you only need £10,000 invested before you start paying tax. Any dividends over the allowance are taxed at 8.75%, 33.75% or 39.35% depending on your income

• Capital gains don't get much sympathy either: the annual tax-free allowance has been slashed to £3,000. Above that, you'll pay 18% (if you're a basic-rate taxpayer) or 24% (if you're higher-rate). So, a £20,000 gain could cost a higher-rate payer over £4,000 in tax.

Tips and tricks for GIAs

There are a few ways to keep your tax bill down when investing outside wrappers. None of them involve offshore accounts or numbered safes in Zurich; they just require a bit of planning.

• If you're married or in a civil partnership, use both of your allowances. Transfers between spouses are tax-free, and each of you has separate dividend and capital gains allowances. If one of you pays a lower rate of tax, it can make sense to shift more of the dividend-paying or interest-earning investments to their name. It's not romantic, but it's efficient.

• Pay attention to what kind of income your investments produce. Most people get hit with tax not because their investments are wild success stories, but because they're constantly dribbling out small amounts of income (interest, dividends, capital gains) that chip away at allowances. By contrast, you can structure your portfolio to better fit the allowances available.

As a rule of thumb, it's worth having a mix: some dividend-paying stocks or funds (to use your dividend allowance), some interest-paying assets like bonds or savings products (to use your personal savings allowance), and some growth-focused investments (which generate capital gains you can time more carefully). Relying too heavily on one type of income means you'll run into tax limits sooner.

Finally, there are a few asset types that stand out for their tax efficiency, even outside wrappers. UK government bonds (gilts) and many corporate bonds are exempt from capital gains tax.

If you're eyeing corporate bonds, check that the one you buy is a "Qualifying Corporate Bond" (QCB) under HMRC rules, otherwise, the CGT exemption won't apply. Keep in mind that while capital gains are tax-free on QCBs, the interest is still taxable.

Step nine: explore advanced strategies (if appropriate)

If your lump sum is large enough, you might want to take a look at the posh end of the investment menu. These advanced strategies come with large tax incentives, but they're risky and highly complex. Approaching these with professional, regulated financial advice is strongly recommended.

Venture Capital Trusts (VCTs)

VCTs are investment funds listed on the stock market, pooling investors' money into small, high-risk UK businesses. In return for braving these dicey waters, the government offers attractive tax perks.

• You can invest up to £200,000 each tax year into VCTs and claim a substantial 30% reduction on your income tax. For instance, £100,000 invested would shave £30,000 off your tax bill.

• Dividends come completely tax-free, offering a rare opportunity for higher- and additional-rate taxpayers to receive income without any tax obligations.

• If you hold for at least five years, you can sell your VCT shares without any capital gains tax liability.

Of course, VCTs are about as safe as choosing your investments based on your horoscope. Your funds go into young companies, meaning there's a real chance your investment could fall dramatically in value.

Sell in under five years and your capital gains are taxable. That is, if you've actually made any gains worth taxing.

VCTs are only worth considering if you're an additional-rate taxpayer who's already maxed out your ISA and pensions, and you're up for a high-risk, long-term punt. A regulated adviser can help you work out if you're cut out for this shark-infested voyage or better off sticking to calmer waters.

If this is something you're considering, we've got a full explainer here.

Enterprise Investment Schemes (EIS)

EIS investments are similar to VCTs but involve investing directly in small, unlisted UK companies (or via specialist EIS funds). Again, you're rewarded handsomely for your bravery:

• Investments qualify for 30% upfront income tax relief on up to £1 million per tax year (or £2 million for certain "knowledge-intensive" companies).

• Uniquely, EIS investments can be "carried back" to the previous tax year, giving you flexibility when managing tax bills.

Another perk is the deferral of capital gains tax on other assets if reinvested into EIS. For example, profits from selling property can be reinvested to delay (potentially indefinitely) a hefty CGT bill.

The CGT is not cancelled, but it only becomes payable if you sell the EIS shares, they stop qualifying, or you transfer them. If you hold them until death, the CGT is wiped entirely.

Plus, if the EIS investment fails, you can offset losses against your income tax. You can think of it as HMRC sharing your pain when a risky investment doesn't pan out.

EIS shares held for at least three years also enjoy tax-free growth, and after two years, they qualify for 100% inheritance tax relief. This makes EIS a useful tool for high-net-worth individuals trying to get as much as possible to the next generation.

Just like with VCTs, you're investing into small, unlisted companies, meaning it's an extremely high-risk strategy. You'd only want to consider EIS shares if you're an additional-rate taxpayer who's completely comfortable with the enormous risks involved.

It's advisable to enter EIS with guidance from a financial adviser or tax specialist who can help assess company viability, handle HMRC paperwork, and ensure you meet the qualification rules.

Check out this guide for way more detail on EIS and SEIS (SEIS is very similar, but for companies at the seed stage).

Onshore and offshore investment bonds

Investment bonds are long-term investments that double as tax wrappers for your lump sum. You buy them from life insurance companies. They don't give upfront tax relief like pensions do; however, they can help you grow a lump sum and draw income in a tax-efficient way, particularly useful if you're trying to manage when and how much tax you pay.

There are two types:

• Onshore bonds (based in the UK)
• Offshore bonds (based in low- or no-tax jurisdictions like the Isle of Man or Ireland).

With either, you can withdraw up to 5% of your original investment per year without triggering an immediate tax bill. These withdrawals are treated as a return of your own money (not as capital gains) until you've recouped the full amount you originally put in.

After that, any further withdrawals, or "full encashment" (cashing in the bond entirely), may generate a tax charge on the investment growth.

At first glance, it might sound odd: why hand over your lump sum and only take out 5% a year? But the appeal lies in the tax control.

You're not losing access to your money; you're choosing to defer tax on the growth until a time that suits you, like when you're earning less or have moved abroad.

For high earners today who expect to be in a lower tax band later, that deferral can mean paying significantly less tax overall. It's about shaping when the tax bill hits, not dodging it altogether.

The flexibility around when tax is paid is the main reason some people choose investment bonds. But how much tax you end up paying depends on the type of bond you hold, and that's where onshore and offshore options differ:

• Gains inside onshore bonds are taxed internally by the insurer at the basic income tax rate (currently 20%). So when you eventually cash in the bond, whether partially or in full, you only pay the difference if you're a higher or additional-rate taxpayer. For example, if you're in the 40% tax band when cashing out, you'd owe 20% on the gain. If you're a basic-rate taxpayer, there's usually no additional tax to pay. There's also a mechanism called "top-slicing relief", which can help reduce the tax bill by spreading the gain over the number of years you held the bond.

• Offshore bonds, on the other hand, don't pay UK tax on the investment growth within the bond, which means they can grow faster over time. But the full gain is taxed at your marginal rate when you withdraw beyond the 5% withdrawal allowance or cash in. They're best suited to people who expect to be in a low tax band later or who plan to live abroad and cash them in while non-resident.

Investment bonds can be useful for estate planning, since they can be placed in a trust or transferred to other family members.

But they're complicated beasts, so if you've got enough money to make this kind of investment strategy worthwhile, you've got enough to pay for proper, regulated financial advice to make sure it's set up correctly and actually suits your needs.

To learn more, check out our simplified guide to investing in offshore bonds.

Step ten: think about property

Property is often the first idea people have when they come into a lump sum. After all, who doesn't like the reassuring solidity of bricks and mortar?

But before leaping into becoming a landlord or snapping up that quaint holiday cottage, take a moment to consider the full picture.

Direct property investment

Buying a rental property outright can feel sensible, offering steady income and the chance of long-term price growth. But it comes with more strings attached than other investments:

• Illiquidity: Unlike selling shares, you can't quickly offload part of a property if you need cash urgently. It usually takes months to sell, along with estate agent and legal fees. If quick access to your money is important, property is about as liquid as an icicle in Antarctica.

• Responsibilities: Landlords have to manage tenants, maintenance, and compliance with safety regulations. You can hire letting agents to do this (typically costing around 10–15% of rental income), but it will chip away at your returns. Becoming a landlord means occasionally dealing with problems you'd rather avoid, like tenants who treat paying rent as though it were an optional service charge, or the sudden arrival of a family of mice in the attic.

• Tax and costs: Recent tax changes have squeezed profits for landlords. Even if you're buying without a mortgage, rental income is taxable at your marginal rate after expenses. Plus, there's an additional 5% stamp duty surcharge on buy-to-let purchases; that's another upfront cost that'll erode your lump sum.

If, despite the drawbacks, you've got your heart set on laying the foundations of a buy-to-let empire, there are some steps you can take to limit the tax burden.

Tax planning for property investors

Property investors face two main tax hits:

• Capital gains tax (CGT): Sell a buy-to-let or second home, and you'll likely pay CGT on any gains. For higher-rate taxpayers, that's 24% on profits (18% for basic-rate payers), with only a £3,000 annual allowance. Sell a house that doubled in value from £150,000 to £300,000, and your tax bill could be in the £36,000 range, due within 60 days of the sale.

• Inheritance tax (IHT): Unlike your main home, which may benefit from IHT reliefs if passed to direct descendants, investment properties count fully towards your taxable estate. If your estate exceeds the thresholds, your heirs could face a 40% tax bill on the property's value.

To limit the damage:

• Use both spouses' allowances where possible. If done far enough in advance, transferring ownership before a sale lets you double your CGT allowance and split the gain across two tax bands.

• Stagger property sales across tax years if you own more than one. This helps avoid pushing yourself into a higher tax bracket.

• Leave property in your will rather than gifting it during your lifetime. When someone inherits your property, CGT is wiped because the asset's value is "reset" to the market price at the date of death. However, IHT may still be alive and kicking if your estate exceeds the tax-free threshold, and heirs could be forced to sell the property to cover the bill.

Bottom line

Getting a lump sum can feel like being handed the keys to a stretched limo; thrilling, sure, but also daunting when you realise you're expected to reverse it into a narrow parking bay lined with bins.

The first five steps in this guide are well-trodden ground: paying off high-interest debt, building savings, filling up your pension and ISA. They're not just sensible; they're also simple and broadly right for most people.

But once you move past that, the road gets twistier.

From here on, you're into the trickier territory of onshore and offshore bonds, Venture Capital Trusts and property tax traps, with the risks of a wrong turn increasing along the way. These strategies can make sense for some people, but be totally wrong for others.

If you've got enough money to make these options seem tempting, you've probably got enough to justify proper, regulated advice before making any final decisions.

Proper advice could be the difference between guessing your way through a complex junction and having someone in the passenger seat who's been there before giving you directions.

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