# IHTM26157 - Step 4 - four stage grossing calculations: example of a four stage calculation

The following example is a straightforward four stage (IHTM26152) grossing calculation involving an estate with property at only one title (IHTM26211), no lifetime cumulation (IHTM31413) and no interaction (IHTM26101). A more complex calculation where these aspects are involved can be found at IHTM26158.

## Example 1

June dies in November 2000

She leaves free Estate of £1.6M. No relievable property. No lifetime cumulation and no other property chargeable on the death.

By Will

• House and chattels (total value £200,000) to surviving spouse
• Legacies of £147,000 free of tax each to the two children

Residue

• Half to the surviving spouse
• Half equally between the two children.

### Stage 1

Gross up the legacies totalling £294,000 to the children at the rate appropriate to their total value.

£234,000 + (100 ÷ 60) (£294,000 - 234,000) = £334,000

### Stage 2

Calculate the initial determination of the chargeable part of the estate.

 Value of the estate £1,600,000 Grossed up value of chargeable specific gifts £334,000 Exempt specific gifts £200,000 Total specific gifts £534,000 Residue £1,066,00 value of half exempt residue £533,000 value of half chargeable residue £533,000

The chargeable free estate is £334,000 + £533,000 = £867,000

### Stage 3

Re-gross the chargeable specific legacies

 Chargeable free estate £867,000 Tax on £867,000 (after nil rate band) is £253,200 Chargeable estate net of tax is £613,800

The gross equivalent of £294,000 is

£294,000 × (£867,000 ÷ £613,800) = £415,279

### Stage 4

Calculate the chargeable estate.

 Value of the estate £1,600,000 LessGrossed up value of chargeable specific gifts £415,279 Exempt specific gifts £200,000 Total specific gifts £615,279 Residue = £984,721 Value of half exempt residue £492,361 Value of half chargeable residue £492,360

The chargeable free estate is

 Value of the estate £1,600,000 Less exempt gifts to spouse Specific £200,000 Residuary £492,361 Total gifts to spouse £692,361 Chargeable estate £907,639

(You can check this final step by adding together the chargeable gifts.)

 specific £415,279 residuary £492,360 Total £907,639