IHT grossing up calculator, 2026/27

How this is calculated

Grossing up is needed whenever a will leaves a specific gift 'free of tax', meaning the beneficiary receives the stated amount in full and the inheritance tax on that gift is paid out of the rest of the estate (the residue) instead of being deducted from the gift itself.

Because the residue is bearing tax on someone else's gift, the value transferred for IHT purposes has to be grossed up so that, after deducting tax at 40.0%, the beneficiary is still left with the full net amount specified. The standard grossing-up formula for a gift falling entirely above the available nil rate band is net amount divided by (1 minus the tax rate), here net ÷ 0.6.

Any part of the legacy that fits within the deceased's remaining nil rate band, £325,000 where none has been used elsewhere, needs no grossing up at all because no tax arises on it; only the excess above the nil rate band is grossed up at the 40% rate.

Why this matters for executors

Getting grossing up wrong can mean the estate pays too much or too little tax, and can also throw out the value that other residuary beneficiaries actually receive, since it is the residue that funds the extra tax on a free-of-tax gift.

Wills that leave multiple free-of-tax gifts, or a mix of free-of-tax gifts and gifts where the beneficiary bears their own tax, require more complex double grossing calculations, and this is an area where professional advice is strongly recommended rather than DIY administration.

Related IHT reliefs to check

The residence nil rate band can add further tax-free allowance where a main residence passes to direct descendants, though it tapers away for estates over £2 million and has its own grossing implications if combined with free-of-tax gifts.

If the estate gives at least 10% of the net value to charity, the reduced 36% rate may apply instead of 40%, which changes every grossing-up calculation in the estate, not just the charitable gift itself.

What does 'free of tax' mean in a will?

It means the beneficiary receives the full amount stated, with any inheritance tax due on that gift paid from the rest of the estate rather than being deducted from the gift, which is why the value has to be grossed up for IHT purposes.

Why can't the tax just be deducted from the gift?

It can, and often is, if the will specifies the gift is not free of tax; in that case no grossing up is needed because the beneficiary simply receives less after their share of the tax is deducted directly.

Does the residence nil rate band affect grossing up?

Yes, if a property passing to direct descendants uses the residence nil rate band, this increases the total tax-free amount available before grossing up applies, and needs to be factored into the calculation for the estate as a whole.

Is grossing up needed for gifts made during lifetime?

Usually not in the same way; grossing up mainly arises on death estates with free-of-tax legacies in a will, though similar grossing calculations can apply to certain lifetime transfers where the donor agrees to pay the tax.