Exchequer Secretary (): At Budget 2025, the
government announced that it would extend the existing relief
from inheritance tax (IHT) for compensation payments made from
the Infected Blood Compensation Scheme and the Infected Blood
Interim Compensation Payment Scheme (‘infected blood compensation
payments'). A Tax Information and Impact Note has been published
and can be found here: https://www.gov.uk/government/publications/inheritance-tax-and-infected-blood-compensation-payments(opens
in a new tab)
Prior to these changes, infected blood compensation payments were
already relieved from IHT on the death of the infected or
affected person eligible for compensation. However, if the
infected or affected person had died before the compensation
payment was received, the IHT relief did not extend to the estate
of whoever received the payment following their own death (‘first
living recipient').
Finance Bill 2025-26 contains a power to make changes to the IHT
treatment of infected blood compensation schemes in secondary
legislation. The government will lay regulations subject to
parliamentary approval of the Bill and this statement sets out
what this means in practical terms and what action impacted
individuals should take ahead of regulations being made.
Changes for first living recipients
First living recipients will be able to pass on the value of
infected blood compensation payments upon their death without
attracting an IHT charge. This change will apply retrospectively.
Alternatively, first living recipients can pass on some, or all,
of their compensation payment during their lifetime as a
‘qualifying gift'. When first living recipients make a qualifying
gift, the compensation will be treated as never having formed
part of their estate. As a result, qualifying gifts will not
attract an IHT charge and the IHT relief on death for the
compensation transferred will also pass to the recipient of the
qualifying gift.
If the compensation payment was made before 4 December 2025, the
first living recipient will have 2 years from 4 December 2025 to
make any qualifying gifts. If the compensation payment is made
after 4 December 2025, the first living recipient will have 2
years from the date of payment to make any qualifying gifts.
Any such qualifying gifts must be recorded in writing and signed
by the first living recipient, even if the gift has already been
made.
Changes for infected and affected people
Any compensation in an infected or affected person's estate on
death will continue to be relieved from IHT.
Lifetime transfers of compensation payments made by infected or
affected people will not attract an IHT charge.
This change will apply retrospectively to qualifying gifts of
infected blood compensation payments which have already been made
by an infected or affected person.
Any such gifts must be recorded in writing and signed by the
infected or affected person, even if the gift has already been
made.
Collection and refunds of IHT on infected blood compensation
payments
As of 26 November 2025, HMRC will no longer collect IHT on
infected blood compensation payments in the circumstances set out
above.
HMRC will also refund any overpaid amounts of IHT made before
these changes were announced. Personal representatives who have
paid IHT on infected blood compensation payments can claim a
refund by submitting a corrective account using form C4, which is
available at: https://www.gov.uk/government/publications/inheritance-tax-corrective-account-c4(opens
in a new tab)
Customers who require assistance with this process can contact
HMRC's IHT Helpline for support. Contact details are available
at: https://www.gov.uk/find-hmrc-contacts/inheritance-tax-general-enquiries
