The Infected Blood Scandal has been described as ‘the worst treatment disaster in the history of the NHS’. The resulting compensation payments are subject to special Inheritance Tax treatment which has been further clarified and extended in the 2025 Autumn Budget.

The Infected Blood Scandal

In the 1970s and 1980’s, an estimated 30,000 people were infected with hepatitis B, hepatitis C and HIV as a result of receiving infected blood in the United Kingdom. Most had haemophilia or received a blood transfusion following childbirth.

Thousands of people have died as a result of their infection, and many others still live with chronic illness and transmitted infections.

EIBSS

In 2024, the long-awaited Infected Blood Enquiry was finally published, concluding that the disaster was avoidable and there were attempts to hide the truth from victims and their families.

As a result, the Infected Blood Compensation schemes began making payments to victims. This was later extended to include affected family members of those who died as a result of the transfusion. There are an estimated 140,000 bereaved parents, children and siblings of the victims that are eligible to claim compensation from the scheme.

Payments were made both as regular payments and lump sum payments at the discretion of the scheme and depending on the type of infection.

Inheritance Tax

From the outset, all payments made by the schemes were exempt from Income Tax, Capital Gains Tax and Inheritance Tax (IHT). The 2025 Autumn Budget extended this relief and as such payments are now exempt from IHT no matter when or how they are passed down.

Where a person eligible for compensation under the Infected Blood Compensation Schemes has already died at the time of payment, the first living recipient 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 exemption ensures that the award can be distributed to the intended beneficiaries in full and recognises the injustice suffered by victims and their families.

Filing an Inheritance Tax return

In order to claim exemption, information regarding the compensation payments and details of the resulting exemption from IHT should be recorded in the IHT400 when submitting the return. There has been no guidance published on how this should be appropriately recorded but it is important to provide as much detail and evidence as possible to HMRC including a full breakdown of the payments received.

It is often the case that necessary information is not readily available to the Executors without the Grant of Probate. Thus, careful consideration needs to be taken when filing the Inheritance Tax Account and subsequent Corrective Account.

If Inheritance Tax has already been paid prior to the extension of the relief granted by the 2025 budget, a claim can be made for refund of the overpaid tax.

Applying for Probate

Where victims have passed away before compensation payments are made, their estates must apply for a Grant of Probate or Letters of Administration in order to claim what is owed to the estate. Whilst there may not be IHT to pay or a requirement for Probate to deal with other assets, the scheme will not pay out to beneficiaries until this is provided.

IHT Planning and updating your Will

If you, or a loved one, are entitled to compensation, then it will be beneficial to review your current Wills as there may be ways in which you can maximise the available tax reliefs for the next generation.

How we can help

Our Private Client team have experience in administering estates which are beneficiaries under EIBSS. If you require guidance in this area, please get in touch.