Inheritance tax relief for infected blood compensation payments

(Limited Text - Ministerial Extracts only)

Thursday 18th December 2025 Written Statements

[The Exchequer Secretary to the Treasury (Dan Tomlinson)]

At Budget 2025, the Government announced that they would extend the existing relief from inheritance tax to compensation payments made from the infected blood compensation scheme and the infected blood interim compensation payment scheme. 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

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 (the “first living recipient”).

The 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 before Parliament, 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 two 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 two 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 that 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, His Majesty’s Revenue and Customs 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

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

[HCWS1209]