Inheritance Tax Relief for Victims of the Infected Blood Scandal

In a significant move to address the ongoing injustice faced by victims of the Infected Blood Scandal, Chancellor Rachel Reeves' 2025 Budget has introduced a welcome and long-awaited change to the Inheritance Tax (IHT) rules for those affected. 

What is the Infected Blood Scandal?
The Infected Blood Scandal refers to the tragic events from the 1970s to the early 1990s, when thousands of individuals, primarily haemophiliacs and others in need of blood transfusions, were unknowingly infected with HIV and Hepatitis C through contaminated blood products provided by the NHS. The victims of this scandal were subjected to unimaginable suffering, and many families continue to deal with the lasting impact of these infections, both in terms of health and financial difficulties.

In recognition of the tremendous hardship faced by those affected, a public inquiry was launched, and compensation schemes have been put in place. However, victims and their families have faced a great deal of uncertainty until today regarding the applicability of IHT on those payments.

The Budget Announcement: A Major Relief
In today's Budget, Chancellor Rachel Reeves announced a new exemption from IHT for victims of the Infected Blood Scandal and their families. This measure is part of the government’s broader efforts to compensate victims and to help alleviate the financial strain caused by the scandal.

From the 2025/26 tax year onwards, any compensation payments or financial settlements received by victims of the Infected Blood Scandal will be exempt from IHT. Previously, these payments were treated as part of the estate for IHT purposes, potentially leading to significant tax liabilities when recipients passed away or when they attempted to transfer wealth to their beneficiaries during their lifetime. This change means that, going forward, those affected will be able to pass on their payments without worrying about IHT on those payments.

What’s Next?
The full details of the implementation of this reform will likely be rolled out in the coming months, and it will be important for victims and their families to stay informed about the practical implications of the changes. For those affected, or for the Executors of those affected, it is advisable to seek professional advice from a suitable qualified Private Client Solicitor on this IHT exemption. If IHT has already been paid, a refund of IHT should be due on this payment.

It is important to monitor further developments to understand how the government’s actions will continue to support victims after Budget Day.