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What do you do if you win £170m on the EuroMillions?

Jonathan Jones
The £170m jackpot is the biggest ever handed out by the to a lottery winner

A so-far anonymous British ticket-holder has won a record £170m Euromillions jackpot, following the longest ever series of rollovers.

It follows on from another anonymous win in June, when one lucky individual scooped £123m.

Lottery winnings are tax-exempt, so every penny is put into the winner’s pocket, but with such a substantial gain, knowing what to do with the cash once it is in your hands can be difficult.

Britain's most recent multi-millionaire will now meet Andy Carter, Camelot's senior winners' adviser, who will present them with a panel of financial advisers and private banks from which to choose. 

Once selected, for a sum of this size, the private bank will take over, with the lottery transferring the entire lump sum in one go, typically within 48 hours. 

Whether you've received a windfall of £100m, or smaller company bonus or inheritance of, say, £10,000, sensible financial planning is crucial.

So what exactly should you do with your winnings?

For the largest winnings many will be advised to let the private bank handle their affairs. But for those who prefer a more hands on approach, here is a checklist of essentials to consider.

The first priority should be to pay off any debts, such as mortgages, credit cards and loans, according to Andrew Merricks, head of investments at financial planning firm Skerritts Wealth Management.

“Get yourself in the black. It takes the pressure off and ensures that money is for you and your family rather than for the debtors,” he said.

After this, the key is to not rush into any decisions, said Mr Merricks. 

“Park it somewhere, such as a bank account, until you know what you want to do with it.” This way you can draw a small amount of interest while working on a financial plan.

One trap that many people who become suddenly wealthy fall into is to buy the big, expensive house of their dreams.

While property can be a rewarding investment, tieing up large sums in a lavish new house may not be a prudent way to spend it. Mr Merricks warned that running costs are disproportionately high on large houses and advised investing extra capital instead. 

Boring but safe savings accounts, government bonds, known as "gilts", or NS&I accounts will provide a small amount of income and can be used for the money you can't afford to lose.

NS&I accounts can also be used to safely hold lump sums, as they are 100pc safe and back by the Treasury. 

Most other accounts only guarantee to protect 100pc of your cash up to a limit of £85,000 – the compensation threshold for the Financial Services Compensation Scheme, a lifeboat fund.

More risky investments such as stocks and shares can be attractive as well but it is easy to get carried away when investing such a large amount, Mr Merrick warned.

Ultimately, working out how much money you want to live on, and finding the lowest-risk way to achieve this, should be the goal.

Remember, while the initial lottery winning was tax-free, any gains made through investing the cash is taxable. Money held in Isas and pension accounts grows tax free, though withdrawals from pensions are taxable at your marginal rate of income tax. 

You can save £20,000 a year into an Isa and normally a maximum of £40,000 into a pension. 

Couples can double up their allowances and you can move investments gradually into tax free structures over the years. You can also invest in funds or shares that grow but don't produce income and sell them off when in need of cash. This may trigger capital gains tax if above the £12,000 tax-free threshold, but the rates are likely to be lower than your marginal income tax rate. 

Some investments in venture capital schemes such as Venture Capital Trusts (VCTs) or the Enterprise Investment Scheme (EIS) can help you to limit your tax exposure, but are inherently high risk as they invest in typically small and new start-up firms. 

Both allow you to claim 30pc income tax relief, while VCTs will provide you with tax-free dividends. 

EIS investments can be passed on free of inheritance tax.