IHTM22072 - Tax burden on death: gifts free of tax

Where on the earlier death your deceased took specific gifts, such as a pecuniary legacy ( IHTM12072) or a specific item of property, free of tax, you can ignore the tax on it in calculating the increase on your deceased's estate. Assuming the earlier estate was big enough to pay the specific gifts in full and the tax on them out of residue, the increase in your deceased's estate is

• the nominal amount of the legacy, or
• the value of the specific item of property as included in the earlier deceased's estate.

If the value of the benefit received from the earlier estate was reduced directly or indirectly by business relief ( IHTM25131) or agricultural relief ( IHTM24001) the increase is based on the value after the reduction by the relief.

Example

T died January 1999. By Will

1. various legacies and gifts of specific items of property to chargeable beneficiaries, all free of tax, and
   
   
2. residue to spouse.
   
   

There was no business or agricultural relief. The grossed up value of all the chargeable specific gifts was £350,000. The tax is £50,800, all paid.

One of the tax-free legacies was £4,000 to B.

B dies in July 2000. The QSR calculation is:

For this calculation you do not need to know either

• the grossed up value of the £4,000 legacy, or
• the amount of the exempt transfer on T's death.