Financial advice for lottery winners: what should I do with my money?
It’s exciting to win the lottery, but what should you do with your money? Here’s how to navigate the financial challenges a major windfall can present.
Winning the lottery can be a euphoric experience, but once the champagne is drunk and the dust settles, you may find yourself struggling to cope with your newfound wealth.
You may also find it difficult managing the expectations of others, such as your family.
This new situation can be daunting and put unexpected pressure on your relationships.
It’s worth taking time to make decisions your newfound wealth and seriously considering qualified financial advice.
Some wealth management firms have specific expertise in helping lottery winners.
An adviser can help you support your family financially and maintain boundaries.
Wealth managers can recommend tax-efficient ways of gifting and investing.
Make sure you choose a wealth management firm authorised and regulated by the Financial Conduct Authority (FCA).
How do I manage my newfound wealth?
It might be tempting to splash out immediately on big-ticket items, but it’s best not to make any major financial decisions until you have received specialist wealth management advice on what to do with your winnings.
Becoming wealthy suddenly also comes with risks. Many lottery winners have ended up spending through their money without much to show for it a few years later.
This table summarises some of the main financial and lifestyle risks facing lottery winners.
Financial risk | Lifestyle risks |
|---|---|
Spending too quickly | Adjusting to your new lifestyle |
Poor investing decisions | Strain on relationships |
Underestimating your tax bill | Loss of privacy |
You will need to find a specialist adviser to help you manage your new financial situation.
How to find a financial adviser
Unbiased can help find a qualified financial adviser specialised in helping lottery winners to help you manage your new wealth.
Make sure you choose a financial adviser who is qualified, authorised and regulated by the FCA.
They should also have at least a Level 4 diploma for financial advisers that is recognised by the FCA.
They must also put in writing to you whether they are a restricted or independent financial adviser and how their advice may be restricted.
Restricted financial advisers can only recommend products from certain companies or provide advice on specific areas of expertise.
Make sure to ask a financial adviser about their fee structure and request recommendations from previous clients.
Unscrupulous actors can try to target lottery winners, so you should find out about your financial adviser’s background before committing to using their services.
If you’ve won the National Lottery, the team there will be on hand to provide initial help in the first instance.
Some wealth management firms may also have specific expertise in helping lottery winners navigate their new situation.
This will begin with an initial consultation to find out what you want to do with your money and ensure that your new financial adviser is suitable for your needs.
Do I pay tax on lottery winnings in the UK?
In the UK, you won’t pay tax on your lottery winnings.
However, you will have to pay tax on any interest or income you make from your money through savings or investments.
Taxes can be complex, but the good news is that there are various ways to minimise your bill.
Here’s a quick summary of the rules.
Taxes due on your wealth | Taxes due | Ways to reduce your bill |
|---|---|---|
Investments | Capital gains tax is due when you sell investments. Dividend tax is due on dividend income from shares. Inheritance tax | Use a stocks and shares ISA to invest up to £20,000 each tax year, which is free from capital gains tax and income tax. Plan timing of selling investments to maximise tax allowances Consider making use of inheritance tax gifting exemptions to pass wealth to loved ones |
Cash | Income tax is due on any interest. Inheritance tax. | Use a cash ISA to invest up to £20,000 each year (reducing to £12,000 for under 65s in 2027), which is free from tax on interest. |
Property wealth | Capital gains tax is payable when you sell a second home. Income tax is payable on rental income. Inheritance tax. | Plan timing of selling property to maximise tax allowances. Consider gifting strategies or trusts. |
A qualified wealth management adviser can help you invest your money in the most tax-efficient way, as well as ensure it generates income for you.
How do I manage family expectations?
Winning a large sum can affect your relationships with friends and family, so it’s important to think carefully about how to share your wealth while maintaining boundaries.
A financial adviser can help encourage responsible wealth management between family members, as well as advise on the most efficient ways to share wealth.
It’s currently possible to give up to £3,000 a year to individuals without incurring inheritance tax.
Plus, other tax-efficient vehicles can be made use of, such as individual savings accounts (ISAs), trusts and the Gift Aid scheme.
If you win a large amount, you may want to consider using trusts to gift wealth to your family. This allows you to retain some control over how and when the money is used.
However, trusts and their tax rules are extremely complex, and it’s important to take advice.
If you wish to give substantial sums to charity, a wealth manager can help introduce you to well-established charitable causes and manage any gifts made tax efficiently.
How should I invest my winnings?
No matter how much you win, you’ll want to make the money work hard for you in the future.
Holding everything in cash, might seem safer, but it’s actually a poor strategy.
The real value of money tends to be eroded by inflation over time.
Instead, it’s worth taking some time now to build a structured portfolio that meets your financial goals.
A well-planned investment portfolio can keep on growing over time, providing you with a steady and long-term income.
Your portfolio should be spread or diversified across a range of asset types.
This means losses in one area are offset by gains in another area, reducing your investing risk.
Here are some assets you could consider owning, depending on your financial needs.
Type of asset | What to consider |
|---|---|
Cash | Cash should make up only a small part of your portfolio to meet your short- and medium-term needs. |
Equities | Although nothing is guaranteed, equity values tend to outstrip cash over time, often significantly beating inflation. Values fluctuate more than cash, so you’ll need some cash to meet short-term needs. |
Bonds | They fluctuate less than equities but tend to grow more than cash. |
Property | You can either invest in physical properties or invest in a property fund as part of your investment portfolio. |
Alternative assets | These are other assets like infrastructure, energy, commodities and private equity. |
Who are the best wealth management firms for lottery winners in the UK?
If you’ve recently come into a significant windfall, such as a lottery win, it’s worth considering wealth management firms with proven experience in handling sudden wealth.
We selected leading wealth management firms consistently mentioned for their outstanding service, expertise, client satisfaction and the biggest in terms of assets under management (AUM).
Firm | Client funds | Minimum account size |
|---|---|---|
Saltus | £9 billion | £250,000 |
Rathbones | £100 billion | £100,000 |
Quilter | £106 billion | £250,000 |
Cazenove Capital | £76 billion | £1 million |
Charles Stanley | £27 billion | £250,000 |
St James’s Place | £179 billion | £50,000 |
Niche Private Clients | £1 billion | £100,000 |
Evelyn Partners | £53 billion | £50,000 |
Stonehage Fleming | £134 billion | £500,000 |
RBC Brewin Dolphin | £52 billion | £150,000 |
When deciding whether a wealth management firm is best for you, it's worth looking at many factors aside from AUM.
How do I plan for the future?
It’s important to have the right strategy in place to plan for the future and work towards your financial aims, whether this is to purchase property with your lottery winnings, donate to charity, or set up a trust fund for your family members.
Wealth managers can also model your forecast future cash flow to keep your financial plans on target and give you peace of mind.
This will also help you determine whether you need to continue working or can retire on the income from your winnings.
Often, they will have strong links with legal firms to provide you with advice on wills, powers of attorney, and how best to manage your estate for inheritance tax purposes.
It’s important to take the time to enjoy your lottery winnings and make the most of them, rather than let them become a burden.
You should avoid rash financial decisions before seeking good quality financial advice from a wealth management firm authorised and regulated by the FCA.
Unbiased can quickly match you with a qualified wealth management adviser.
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