I visted a lady yesterday that got very upset as she had just inherited 8k from her mother. A great boon to her as she had been in dire circumstances for a long time due to divorce etc. She is receiving working Tax Credits and has recently been under an investigation from them. She does not know why and can only guess it may be because her ex husband may still be quoting her address on any tax/benefit documents. This investigation is now over they say, still with no explanation. She has gone through a long drawn out process of providing documentary evidence of her divorce, who's name her household bills are in etc. bank statements, etc. Meanwhile her mother was dying and has recently died.

She believes she may lose any benefit from her mothers money.
Two questions:- Does she have to declare this gain to the Working Tax Credit people? + Is this classed as capital and therefore not income, and not included in any income calculation?

I am involved through her late mother who was a client of mine. This is not my area of expertise so I would be most grateful for any advice. Thanking you in anticipation of a response.

IN short, no. Only income from capital is taken into account and she can leave this until the the end of tax year consolidation process if she wishes.

I agree that this is not income for any tax/tax credit purposes.

Sometimes if an estate took a time to wind up and there is a sole beneficiary there might be a little bit of investment income (for example, bank interest)in the monies passed across which belongs to the daughter rather than the mother.

Whoever dealt with the mother's estate should have told the daughter if there was.

I agree with everything that's been said but wanted to add:

1. There is no Capital Limit for tax credits, though taxable income from savings is taken into account.

2. The first £300 a year of investment income is ignored. So she may find that her tax credit is affected, especially if she has other savings.

3. £300 is 3.75% of £8,000 so it is possible it could affect her tax credits, though not this year as your income can increase by, up to, £25,000 in a given tax year without affecting your current tax credits.

She certainly shouldn't be advised to deliberately deprive herself of potential income in order to get more tax credits. On the other hand it's easy to imagine she may need repairs to property, or new furniture etc

Thank you all for your replys. They have been very useful in putting this lady's mind at ease. It is ignorance of the facts that spreads fear afterall. It is right that she should be able to smile and benefit from the money her mother has worked hard for and not make her anxious and worry.
She has a lot to do with this money no doubt, left with two young children and a house to keep on her own.