Single Grossing - who bears the IHT?

I am dealing with an estate where £520k of pec and spec legs are left “free of tax” and residue passes 100% to charitable beneficiaries. No Benham or Ratcliffe direction.

The available total NRB is £392k, so there is IHT to pay. We will qualify for the reduced rate, so I have used the 36% single grossing calculator to come up with the IHT due.

Who bears the IHT - residue? I assume the non-exempt legatees receive their stated sums in the will but this is now ‘net’ of IHT?

Gemma Hambright

If you gross up the legacies the effect is to increase them. The Will is effectively interpreted as saying that the legatee gets £x after tax. The net amount received by the beneficiaries is the figure given by the Will, the difference between the grossed up amount and the next of IHT amount if the IHT payable. The executors pay that and in their accounts will show the grossed up legacies. The inevitable consequence will be that the residue is less. The residuary charity beneficiaries don’t “bear” the IHT but it has the effect of reducing what they get.

Simon Leney
Cripps LLP