No – not unless there’s a particular financial or tax reason to act.

Giving yourself some breathing space can be particularly valuable, especially following a bereavement.

That said, there will be some practical things to deal with. You’ll want to know exactly what you’ve inherited, whether it’s cash, investments, property or a combination, and review any debts or financial commitments you already have. Remember, if you have a substantial amount sitting in cash while you decide what to do, that money is protected.

The Financial Services Compensation Scheme (FSCS) currently protects eligible deposits with UK banks and building societies up to £120,000 per person, per institution. Certain temporary high balances, like that created by an inheritance, could receive additional short-term protection of up to £1.4 million for six months, subject to the FSCS rules.

Breathing space also gives you time to get a clear picture of your current financial circumstances, existing provision and any shortfalls you might want to address.

You don’t need to know what you’re going to do with every pound at this stage. The more important first step is understanding where you are now and how much your position has changed.

When a substantial inheritance arrives, it’s natural to focus on the money itself. Where should you put it? Should you invest it? Would paying off the mortgage be the sensible thing to do?

Those are all reasonable questions, but they may not be the best place to start. It’s better to think about whether, and how, you might want to change your life now that you have more choice.

Perhaps you’ve always expected to work until the State Pension kicks in, but only because it’s the point at which the retirement you envisage looks affordable. With this additional capital behind you, you might be able to stop work earlier or reduce your hours and take a more gradual route into retirement.

You might have children, or grandchildren who are struggling to get onto the property ladder and would rather help them now while you’re around to see the benefits. You might want to move home, travel more while you’re fit and healthy, create a larger financial cushion for later life, or simply feel able to spend more without worrying you’re jeopardising your long-term financial stability.

And your ambitions don’t have to be dramatic. Sometimes having more money simply gives you more control. You could turn down work you no longer enjoy, spend more time with your family or feel more comfortable enjoying your money rather than always preserving it for the future.

This is where Amber River’s Life Landscaping® approach is particularly relevant. Rather than beginning with investments, products or tax allowances, it starts with understanding what matters to you and what you want your life to look like. The financial plan can then be built around those priorities.

One of the most useful things you can do after receiving a significant inheritance is revisit some of the financial decisions you’ve already made.

Your pension contributions, investment strategy, mortgage plans and intended retirement date will all have been based on the income and assets you expected to have. A substantial inheritance can change that picture quite dramatically.

It might mean you no longer need to take quite as much investment risk to achieve your goals, or that the balance between pensions, investments, cash and debt needs to be reconsidered. Decisions that were appropriate before the inheritance may now look quite different.

In other words, the inheritance doesn’t just give you more money. It can give you more options. And that may mean some of the decisions that made sense a few years ago are worth looking at again.

Paying off the mortgage is often one of the first things people consider after receiving a large lump sum, and it’s easy to understand why. Clearing the debt could reduce your monthly outgoings, remove future interest costs and provide the reassurance of knowing your home is fully paid for.

However, it’s not automatically the right choice.

The answer will depend on a number of factors, including the interest rate you’re paying, how long the mortgage has left to run, whether there are early repayment charges and what you might otherwise do with the money. Using £150,000 to clear a mortgage, for example, also means that £150,000 is no longer available to invest for your future, support an earlier retirement or help your family.

There’s also a personal element that financial calculations don’t always capture. Some people dislike debt and place a higher value on being mortgage-free, even if another option might potentially produce a better financial return. Others are comfortable with an affordable mortgage because keeping more capital available gives them more flexibility elsewhere.

So rather than asking whether paying off the mortgage is objectively the “best” thing to do, it may be more useful to consider what clearing it would change for you, and what other opportunities you’d potentially be giving up by using the money that way.

It’s tempting to assume that a large inheritance ought to be invested, particularly if you don’t expect to spend the money immediately.

Investing is suitable for money you’re happy to tuck away for five or more years. And remember the risks involved: the value of investments can fall as well as rise and you might get back less than you invest.

Leaving substantial sums in cash, on the other hand, can expose them to inflation, which gradually reduces their spending power.

It’s worth thinking about what this money is actually for.

Money you intend to contribute towards a child’s house purchase in a couple of years has a very different purpose and timescale from money intended to help fund your retirement over the next 25 or 30 years.

You may ultimately decide to invest a substantial proportion of your inheritance, but you’ll also need to consider how soon you may need the money, what investments you already own, your attitude to investment risk and your ability to tolerate losses, as well as diversification and the tax-efficient allowances and structures available to you.

You might find that there isn’t one simple solution for the entire inheritance: some could remain in cash, some could be invested, some may be used to reduce debt and some could be earmarked for spending or gifts.

A substantial inheritance can make the greatest difference for someone close to retirement.

It could bridge the years between finishing work and receiving pension income. You could pay off any remaining mortgage to reduce the level of income you need each month. Or the inheritance might make a phased retirement possible, allowing you to enjoy a healthier work-life balance before you stop working altogether.

That doesn’t mean you should automatically retire earlier simply because you can. You may enjoy your work and decide you would rather carry on, perhaps while spending more on holidays or helping your family.

The important change is that the inheritance could give you greater flexibility over what you decide, rather than leaving your financial situation to dictate the answer.

Receiving money from one generation often prompts thoughts about passing some of it straight on to the next.

If the inheritance has come from your parents, you might feel that helping your own children is a natural continuation of that support, especially if they’re at a point in their lives when it could make a meaningful difference.

A £50,000 contribution towards a house deposit when your child is 30, for example, could potentially be more useful to them than inheriting the same sum several decades later. But before making a substantial gift, it’s important to understand what you may need for your own future.

A large inheritance can initially feel like additional or “spare” money. Yet that same capital may need to support you for several decades of retirement, help cover unexpected spending or provide additional security if your circumstances change.

You might find you can comfortably give away more than you expected. Equally, the numbers may show that keeping a larger proportion would give you greater long-term security.

There are also tax and estate-planning considerations when making gifts. Some lifetime gifts may eventually fall outside your estate for Inheritance Tax purposes, while others are covered by specific exemptions and allowances, so don’t assume that every gift is treated in the same way.

The important thing is to decide how much you want to give with a clear understanding of the tax implications and what it means for your own future, rather than making a generous decision now that you may later struggle to undo.

You don’t usually pay tax simply because you receive an inheritance. Any Inheritance Tax due is normally paid by the deceased person’s estate before the assets are passed to beneficiaries, although there are circumstances where a beneficiary may have tax to pay. Income or gains generated by inherited assets afterwards can also create separate tax liabilities.

However, receiving a substantial inheritance could have an important knock-on effect: it could significantly increase the value of your own estate.

For someone who was already financially comfortable, that could mean their estate is now closer to, or above, the relevant Inheritance Tax thresholds. It might therefore be an appropriate time to review your will, your existing estate-planning arrangements and how you ultimately want your wealth to pass to children or grandchildren.

This doesn’t mean you should immediately start giving money away simply to reduce a future tax bill. Your own financial security and the life you want to lead still come first. But if the inheritance has materially changed your wealth, it makes sense to understand whether it has also changed your longer-term estate-planning position.

Once you have a clearer idea of what you want your inheritance to make possible, cashflow planning can help you test whether those choices are sustainable.

An independent financial planner will seek to understand you, your family, your hopes and dreams in life. They can then bring together your inheritance, pensions, ISAs, savings, investments, property, future income and expected spending, and model how different decisions could affect your life and financial situation over the years ahead.

For example, you could compare retiring at 58 instead of 63, paying off the mortgage, gifting £100,000 to your children, buying a more expensive property or increasing your retirement spending. More importantly, you can see what happens when several of those choices are combined.

The results might show that you have more flexibility than you realised. Equally, they might highlight where one decision creates a trade-off elsewhere – perhaps retiring earlier is affordable, but doing so alongside a substantial gift would leave less financial margin later in life.

Cashflow planning helps make those trade-offs clearer, so you can decide which choices have the greatest value to you.

A large inheritance can change the maths, but more importantly, it can change the choices available to you.

That can make it tempting to start allocating the money straightaway: some to the mortgage, some to investments, some to the children and perhaps a little put aside to enjoy.

There’s nothing wrong with any of those. But before deciding how much goes where, it can be useful to ask a bigger question: what would you genuinely like this money to change?

It might change when you retire, how much you work, the financial start you can give your children, where you live or how much freedom you have to travel and enjoy your time. Or it may simply give you greater security and the confidence to worry a little less about money.

Once you understand what matters most, the financial decisions become much easier to frame.

The aim doesn’t necessarily need to be to maximise the inheritance or preserve every pound. It’s to use it in a way that supports the life you want, while making sure the decisions you make today remain sustainable in the years ahead.

What should I do first after receiving a large inheritance?

You don’t necessarily need to make any major decisions immediately. Start by understanding exactly what you have inherited, making sure any cash is held securely and reviewing your wider financial position. You can then consider what you would like the inheritance to help you achieve before deciding how to use it.

Should I invest my inheritance straight away?

Not necessarily. It can be useful to establish how much of the money you may need in the short and medium term before investing. Your investment strategy should reflect the purpose of the money, how long it is likely to remain invested and your wider financial circumstances.

Where should I keep inherited money while I decide what to do?

Cash may provide a temporary home while you consider your options. However, check the protection applying to the institution where the money is held. The FSCS currently provides standard eligible deposit protection of up to £120,000 per person, per institution, with qualifying temporary high balances such as inheritances potentially protected up to £1.4 million for six months.

Should I use my inheritance to pay off my mortgage?

It depends on your mortgage rate and terms, your other financial resources, what else you would like the inheritance to achieve and how important being debt-free is to you. Paying off the mortgage may be right for you, but it shouldn’t automatically be assumed to be the best use of the money.

Can an inheritance help me retire early?

Potentially. Additional capital could help bridge the years between finishing work and receiving pension income, or paying down debt could reduce the income you need in retirement. Cashflow modelling can help show whether retiring earlier is sustainable alongside your other plans.

Should I give some of my inheritance to my children?

You may decide that helping your children now would have a greater impact than leaving them more money in the future. Before making significant gifts, however, consider what you need for your own long-term financial security and any tax or estate-planning implications.

Do I have to pay tax on inherited money in the UK?

You don’t usually pay tax simply because you receive an inheritance. Inheritance Tax is normally dealt with by the estate before assets are distributed. However, you may later pay tax on income generated by inherited assets or Capital Gains Tax when certain inherited assets are sold.

Could receiving an inheritance affect my own Inheritance Tax position?

Yes. A substantial inheritance could increase the overall value of your estate, which may alter your future Inheritance Tax position. If your wealth has changed significantly, it may be sensible to review your will and wider estate planning.

Do I need a financial adviser after receiving an inheritance?

Not everyone who inherits money will need financial advice. However, if the inheritance is large enough to affect decisions about retirement, investments, property, gifting or estate planning, professional financial planning can help you understand how those choices interact rather than considering each one separately.

How can cashflow planning help me decide what to do with an inheritance?

Cashflow planning can model different ways of using the inheritance and show how those decisions could affect your finances over your lifetime. This can help you compare choices such as paying off debt, retiring earlier, investing, giving money to your family or increasing your spending, while considering the impact on your longer-term financial security.