Private client membership and professional organisations the Society of Estate and Trust Practitioners (STEP) and Association of Lifetime Lawyers (ALL) are celebrating after securing the exemption of inheritance tax (IHT) on payouts to the families of victims of the infected blood scandal.
The issue was raised earlier this year when it was identified that although payouts directly to victims of the scandal would be exempt from inclusion in IHT calculations, if the victim was deceased by the time of the compensation, it would be included in the family’s estate.
In her budget yesterday, Chancellor Rachel Reeves confirmed ‘all payments from the Infected Blood scheme from inheritance tax regardless of the circumstances in which those payments are passed down.’
Emily Deane TEP, Technical Counsel and Head of Government Affairs at STEP, said:
“We are hugely relieved that the Rt Hon Rachel Reeves MP has compassionately addressed the critical ‘secondary transfer’ flaw in the Autumn Budget. The government has listened and are doing the right thing. Bereaved families of victims of the infected blood scandal should never have been put in this position. We thank all the victims and the families who campaigned for this outcome, and shared their voices to ensure that they and other victims will now receive their full and rightful compensation.”
Jade Gani TEP, Chair of The Association of Lifetime Lawyers, added:
“This news will bring much needed relief to victims and their families. If a victim who is alive can leave their compensation to their children or other beneficiaries without paying IHT, then the children or spouses of those who have already died should also be able to receive their inheritance without tax.
“We acknowledge and thank the government and MPs for taking action. We also want to take the opportunity to thank advisors, victims and their families, and the media for their sustained reporting and coverage of the ‘secondary transfer’ flaw. This has undoubtedly helped to keep the focus on this ongoing and unacceptable injustice. We are committed to working with government to ensure that legislative changes are put in place swiftly.”
More than 30,000 people in the UK were infected with HIV and hepatitis C after being given contaminated blood products in the 1970s and 1980s. Of those 30,000 people, more than 3,000 have died as a result of the scandal, and an estimated 140,000 bereaved parents, children, and siblings of victims were also affected.
Despite bringing the issue to the attention of HMRC earlier this year, the campaign made little headway until the publication of an open letter in October of this year. Following the Budget, STEP and ALL said they received an update from HMRC thanking them for their ‘correspondence in recent months on secondary transfers of infected blood compensation payments.’
“At Budget today, the Chancellor announced that the government will extend the existing system of IHT relief for payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Payment Scheme.
“If the infected or affected person eligible for compensation has already died at the time compensation is paid, the estate of the first living recipient(s) of that payment will receive an ‘IHT credit’ to pass on the value of the compensation following their own death without an IHT charge. This change is effective immediately and applies to compensation payments made before or after 26 November 2025.
“The first living recipient(s) will also have two years in which to make a gift of some or all of the compensation payment they receive without an IHT charge. These changes will have effect for gifts of compensation made during the lifetime of the first living recipient on or after 4 December 2025.”
The changes will be legislated for in the Finance Bill 2025-26 with the enforcement backdated such that ‘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.’
