What to do with money from redundancy, inheritance or divorce, before you make any big decisions

What makes this money different from an ordinary windfall

Most guides to a lump sum are written for a bonus, a lottery win or a business sale, moments that are, on the whole, happy ones. Redundancy, inheritance and divorce settlements are different, because each arrives when something has ended: a job, a life, a marriage. That context matters, because you are almost certainly not deciding from a neutral state of mind.

It is also more common than it can feel. Redundancy alone affected an estimated 106,000 people in the UK between April and June 2026, according to the Office for National Statistics Labour Force Survey, a redundancy rate of 3.6 per 1,000 employees. Add everyone inheriting or divorcing over the same period, and a meaningful share of women reading this are living through exactly this right now.

Why rushing a decision now usually costs you later

The instinct when money like this lands is to do something with it quickly, pay something off, invest it, give some away, if only to make the discomfort of holding it go away. That instinct is worth resisting. Grief, job loss and relationship breakdown all affect the quality of a decision, and what feels urgent in week one rarely still feels right by month six.

Treat the first few months as a holding period, not a decision point. Move the money into an easy access account paying a competitive rate, and give yourself a genuine window, three months is a reasonable start, before committing to anything beyond the essentials. Waiting does not cost you the money. Rushing sometimes does.

The tax rules that actually apply to each type of money

Each source of money is taxed differently, which makes this an expensive area to get wrong while you are already stretched. Redundancy pay is tax free up to £30,000, with anything above that taxed as income, according to Acas, and it is easy to assume a whole payout is protected when only part of it is.

An inheritance itself is not usually something you pay tax on personally, since Inheritance Tax is typically settled by the estate first. But the thresholds matter: the nil rate band of £325,000 and the residence nil rate band of £175,000 are both frozen until April 2030, according to HM Revenue and Customs, one reason more estates become liable each year without any real rise in wealth.

A divorce settlement carries its own quirk around Capital Gains Tax on property or investments transferred between you and an ex-partner. Since April 2023, separating couples have up to three years after the year they stopped living together to transfer assets without triggering the tax, and unlimited time under a formal divorce agreement, according to GOV.UK, a timing detail that can matter a great deal when a property is involved.

A simple order of operations, from the first weeks to the longer term

Separate the money from your everyday current account first, so it does not get absorbed into ordinary spending without you noticing. From there, a sensible order is: top up an emergency fund to three to six months of essential costs, clear any high interest debt, and review whether your protection needs have changed, particularly if redundancy or divorce has altered who depends on your income. Resist pressure, from family, friends, or your own sense of urgency, to decide before you are ready.

Once the essentials are covered, the more familiar tools come into play: pension contributions, which carry tax relief and can be especially valuable if your income has changed, and a Stocks and Shares ISA if you are investing for growth. If the money touches tax, debt, pensions and protection all at once, it is often worth one conversation with someone who sees the whole picture rather than one piece of it.

From Lucy, co-founder of Welleness

I have sat with more than one friend at her kitchen table while she stared at a bank transfer that had just landed, money from redundancy, from a will, from finally signing the papers, and felt nothing like relief. It is a strange kind of money. It arrives because something hard happened, and it carries that weight with it.

What I always say is the same thing I would want someone to say to me. You do not have to know what this money is for today. You are allowed to let it sit there for a while, in an account that pays you something for waiting, while you get your feet back under you.

If there is one thing I would want a woman reading this to take away, it is that asking for help with this kind of money is not a sign you cannot manage it. It usually means the opposite, that you are taking it seriously enough to get it right.

What you can do now

Open a separate easy access savings account today and move the money into it, so it is out of your everyday spending and earning something while you decide what comes next.

If redundancy is involved, check your payslip or settlement agreement to see how much of your payout actually falls within the £30,000 tax free allowance.

If a divorce settlement involves transferring property or investments, ask your solicitor about timing before you sign anything, since the three year window starts from when you stopped living together, not from the divorce itself.

FAQ

Do I have to pay tax on an inheritance?

Generally not personally. Inheritance Tax is usually paid by the estate first, though the current thresholds, £325,000 plus £175,000 for a qualifying main residence, affect how much tax the estate pays.

Is all of my redundancy payout tax free?

No. Only the first £30,000 is tax free. Redundancy pay above that, along with anything like unpaid holiday or notice pay, is taxed as income.

Do I need a financial adviser, or can I manage this myself?

Plenty of people manage it well alone. Advice tends to help most when several things collide at once, tax, debt, pensions and future planning, and you want someone to see the whole picture.

Here is what one Welleness member said after completing her financial health check.

"The app triggered the realisation that speaking to one person who can look at everything is more valuable, rather than individual specialists who you then have to re-educate on all your different bits." Agnes, Welleness user

If any of this has made you wonder whether you are handling your own situation well, our free financial health check takes less than five minutes and gives you a clear picture across six areas of your financial life. No judgement, no jargon, just clarity on what to do next.

This post is for informational purposes only and does not constitute financial advice. For guidance specific to your situation, speak to a regulated financial adviser.