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HMRC internal manual

Inheritance Tax Manual

Pensions: treatment of alternatively secured pensions from 6 April 2007: grossing up unused NRB

Where the chargeable value of the estate, ignoring the ASP, is less than the nil rate band (NRB) at death, the unused NRB is available to deduct against the charge arising on the ASP fund. In order to reflect the fact that the funds will also bear an Income Tax charge and to ensure that the overall charge remains the same, the unused NRB must be grossed up in cases where the IHT charge comes first. The formula for grossing up is contained in IHTA/S151A(4C).


The scheme member dies and leaves an estate of £200,000. The IHT NRB is £300,000. The value of the funds in their ASP is £250,000. The unused NRB is available to be set against the ASP funds.

Assuming the scheme administrator has not made an unauthorised payment before the IHT falls due, the full value of the ASP is chargeable to IHT. The unused NRB should be grossed up by the formula below, where the maximum rate of Income Tax chargeable is 70%

Unused NRB × 100 ÷ (100 - maximum rate of Income Tax chargeable) or

£100,000 × 100 ÷ (100 - 70) = £333,333.

As this exceeds the value of the ASP funds, there is no IHT to pay.