HMRC internal manual

Inheritance Tax Manual

Step 4 - simple grossing calculations: calculation when there is no lifetime cumulation

If there is no lifetime cumulation (IHTM31413) and the conditions at IHTM26131 are satisfied, the grossed up value of the chargeable specific gifts (IHTM26011) is

  • the threshold at the date of death, plus
  • The amount by which the total value of the chargeable specific gifts exceed the threshold × (100 ÷ 60)

Example 1 (includes settled property)

Trevor died on 1 May 2000. The IHT400 (IHTM10021) shows a free estate of £600,000. There is no relievable property and no lifetime cumulation, but there is chargeable settled property valued at £250,000.

By Will (IHTM12041)

  • £88,000 free of tax to each of Trevor’s three children
  • £5,000 to a charity absolutely
  • residue (IHTM26003) to Trevor’s spouse (IHTM11032) absolutely.

The chargeable specific gifts which do not bear their own tax total £264,000. There are no other chargeable gifts in the free estate.

The grossing calculation is

Total value of chargeable specific gift £264,000  
Less whole of the threshold £234,000  
Excess = £30,000  
£30,000 × (100 ÷ 60) £50,000  
Add the threshold £234,000  
Grossed up value of the chargeable gift £284,000  

You can easily check the result.

Tax at 40% on £284,000 - £234,000 £20,000  
Add value of the specific gift £264,000  
Chargeable gift £284,000  

The total chargeable transfer on death is

Grossed up value of the chargeable gift £284,000  
Settled property £250,000  

As Trevor died on 1 May 2000 a calculation would show tax on the death estate of £534,000 as £120,000 of which £63,820.22 is attributable to the free estate. Because of the settled property, the tax liability is greater than the grossing addition.

As the estate as returned is clearly sufficient to pay the legacies (including that to the charity) and tax, there is no need to consider its value

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Example 2 (includes relievable property)

Tina died 1 October 2001. She left free estate of £1M, including unlisted shares valued at £500,000 which qualify for business relief at 100%. No lifetime cumulation. No other property chargeable on the death.

By Will

  • £150,000 free of tax to each of Tina’s four children
  • residue to Tina’s spouse absolutely.

Applying the 6 stages (IHTM26104)

Stage 1

The value transferred after BR is £500,000.

Stage 2

There are no specific gifts of relievable property.

Stage 3

The pecuniary legacies totalling £600,000 have to be reduced by £500,000 ÷ £1,000,000

(the IHTA84/S39A(4) fraction) (IHTM26101) to £300,000.



The chargeable legacies as reduced to £300,000 have to be grossed up. They gross up to (100 ÷ 60) × (£300,000 - £242,000) + £242,000 = £338,667.

Stages 5 & 6

The chargeable transfer is £338,667 and the residue (£161,333) is exempt.