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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Step 4 - simple grossing calculations: calculation when there is a lifetime cumulative total which is below the threshold

If there is a lifetime cumulative total (IHTM14501) which is lower than the threshold at the date of death and the conditions at IHTM26131 are satisfied, the cumulative total has to be deducted from the threshold. The calculation is then similar to the one used where there is no lifetime cumulative total (IHTM26142) but with the unused balance of the nil rate band substituted for the threshold.


The facts are as in Example 1 at IHTM26142 - Trevor died on 1 May 2000 - but with a lifetime cumulative total (including PETs (IHTM04057)) of £80,000.

The grossing calculation is

Total value of chargeable specific gifts (IHTM26011) £264,000
Deduct unused balance of nil rate band (Threshold £234,000 minus cumulation of £80,000) £154,000
Excess £110,000
Excess of £110,000 × (100 ÷ 60) £183,333
Add unused balance of nil rate band £154,000
Grossed up value of chargeable gifts = £337,333

You can check the grossing calculation in the following way

To find the tax on the grossed up value of £337,333 add the cumulation of £80,000 which equals £417,333. Deduct the threshold of £234,000 and the result is £183,333

Tax at 40% on £183,333 is £73,333

Deduct that tax from the grossed up value of the gifts (£337,333-£73,333)

The result is the starting value of the chargeable gift £264,000

The free estate assessment on Trevor’s death is based on the following figures.

Capital value now liable (that is grossed up value of the chargeable specific gifts) £337,333
Lifetime cumulative total £80,000
Settled property (IHTM16000) £250,000
Aggregate chargeable transfers is £667,333