Advice for the EuroMillions winners

Last week Les Scadding and his wife Samantha Peachey-Scadding from Caerleon, South Wales, won £45.5m on the EuroMillions. Two IFAs offer their advice tips...

This huge, tax-free win means the couple is now as wealthy as many supermodels, footballers and movie stars.

Mr Scadding, 58, is an unemployed grandfather of six and cancer survivor. His wife, 38, runs a marketing and PR company from home. What should they do with their newly found fortune?

Peter McGahan, managing director, Worldwide Financial Planning Limited

The UK Government will have helped Les and Samantha with the extra nil-rate band for inheritance tax. That will have pulled the total IHT bill down from £18,070,000 to a mere £17,940,000. What a bonus!

The extra allowance for an ISA will help, as Les can now put in £10,200 into an ISA but Samantha will have to suffice with £7,200 as she isn't aged 50 yet. She can enjoy that pleasure in April 2010 when everyone will benefit from the higher allowance.

An investment into a range of products that impose capital gains tax and offer growth per year of 7%, will after allowances attract £573,300 in tax per year. However, this is still more attractive than the good old investment bond that most people invest in. Unfortunately for Les and Samantha they will be hit for their highest rate of tax on the income on any gain in a bond.

For example, an investment into an onshore investment bond (which is basically a default vehicle for most bank or tied advisers) would enjoy the highest rate of tax on the gain. So they invest at year one and five years later after a return of 7% per year they decide to encash. The gain which is added to their income for the year is £18,316,103. If plans to tax higher-rate taxpayers at a mere 50% come into play in April 2010, Les and Samantha will have to part with nearly £9m in tax.

So a few tips to consider: The accountant you used to work out your day-to-day expenses will probably need an upgrade.

Consider an offshore bond with investments, but use a fee-based adviser so as to pay for the services in a tax efficient manner. An offshore bond allows for tax free growth on the investment (apart from a small element of withholding tax in certain countries of origin). All the investments inside this tax efficient wrapper can be traded without any liability to capital gains tax. Les and Samantha could disappear for a year and become non resident for a year and then encash the bond outside of the UK's tax regime. They should make whatever gifts they can now to mitigate inheritance tax, use a qualified investment specialist rather than a generalist and ask for lots of opinions on their ability.

And, while I am sure they will not let it affect their lives, they will probably, for tax reasons, knock the overtime on the head.

Martin Bamford, managing director, Informed Choice

This is clearly a life changing event for Les and Samantha. I have no doubt that they will be on the receiving end of plenty of well-meaning advice from family, friends, professional advisers touting their services and, sadly, a few crooks as well. It is important that they take things slowly, don't rush into any major decisions and ensure they are doing things for the right reason, rather than to line the pockets of others.

A good plan of action would be to work with a professional qualified financial planner on a fixed project fee basis, so there is no motivation for the adviser to recommend a commission paying investment solution. Paying a fixed fee will ensure there is no potential for bias with the advice. The lottery organisers will want to parachute in their own financial adviser, but these winners are at liberty to shop around and find an adviser better suited to their own needs.

Suddenly being on the receiving end of a substantial amount of money can place a great deal of strain on even the most secure relationships. As well as their own marriage, they will need to pay particular attention to the relationships they have with their family. It would make sense to establish firm ground rules now in terms of the money, how it will be used during their lifetime and what any future inheritance might look like.

For any future lottery winners, possibly the best advice would be to keep their identity secret. Going public on a big win can bring with it unwanted attention and problems. Confidentiality can give lottery winners some much needed breathing space and allow them to make important decisions in their own time.