1. A Landmark Tax Exemption for Victims and Families

In a significant move, the Chancellor has announced that all compensation payments made under the Infected Blood Compensation Scheme will be exempt from inheritance tax, no matter how or when they are passed down. This means that if you receive compensation—whether as an infected person, a bereaved partner, or as part of an estate—these funds will not be counted towards your estate’s inheritance tax bill. This exemption applies regardless of the circumstances, offering peace of mind that your award can be passed on in full to your loved ones.

This change recognises the injustice suffered by victims and their families, ensuring that compensation is not diminished by tax when it is most needed. It also means you can plan your legacy with greater certainty, knowing your award will reach those you care about.

2. Who Is Eligible and How to Start Your Claim

Eligibility for the Infected Blood Compensation Scheme is broad. You may be able to claim if you were directly infected with HIV, Hepatitis B, or Hepatitis C from contaminated blood or blood products, or if you were infected by living with or being the partner of someone who was infected. Estates of those who have died as a result of infected blood are also eligible to claim the same types of compensation as someone who is alive.

To begin, you should:

• Register your intent to claim with the Infected Blood Compensation Authority (IBCA).

• Gather evidence of your infection or your relationship to the infected person.

• If you are claiming as an estate, ensure you have the necessary documentation to prove your entitlement.

If you are nearing the end of life, your claim will be prioritised. If you are both infected and affected (for example, you and a partner were both infected), you can make separate claims for each category.

3. Estimating Your Compensation and What to Do If You’ve Already Paid Inheritance Tax

To help you plan, the IBCA provides a compensation calculator so you can estimate your likely award before making a claim. This tool considers your infection, its severity, and your personal circumstances. Your claim manager will also guide you through the process and help you understand what you’re entitled to.

If inheritance tax has already been paid on a compensation payment:
You should contact HMRC as soon as possible. Explain that the payment was from the Infected Blood Compensation Scheme and is now exempt from inheritance tax. HMRC can process a refund for overpaid tax, but you may need to provide evidence of the payment and the circumstances. If you’re unsure, include a covering letter with your request for repayment, and keep copies of all correspondence.

4. How Your Compensation Amount Is Calculated

Your compensation is made up of several awards, each recognising a different impact the infected blood scandal has had on your life. These include:

• Injury: For physical and mental harm, including emotional distress.

• Social Impact: For stigma or isolation experienced.

• Autonomy: For loss of control over personal decisions, such as family planning or medical consent.

• Care: For years you have needed, or will need, help due to your infection. You can choose for this award to go to someone who provided you with care.

• Financial Loss: For lost earnings and reduced ability to work, including time spent caring for children or maintaining a household.

The amount you receive for each award depends on the severity of your infection and your circumstances. If you believe your needs or losses are greater than the set amounts, you may be able to apply for extra compensation through the supplementary route, especially if you were a high earner or had exceptional care costs.

5. Passing On Compensation: Protecting Your Family’s Future

One of the most reassuring aspects of the new exemption is that compensation payments can be passed on to your children, partner, or other beneficiaries without any inheritance tax liability. This applies whether you gift the money during your lifetime or it forms part of your estate after your death. If you die before receiving the full value of your assessed future financial loss or care awards, your estate can apply for the remainder, ensuring your family receives the full benefit.

Actionable steps:

• Update your will to include details of your compensation award.

• Inform your executor and beneficiaries about the inheritance tax exemption.

• Keep all documentation relating to your compensation and any correspondence with IBCA or HMRC.
  
  

6. Maximising the Benefit: What You Should Do Now

To make the most of your compensation and ensure your family is protected:

• Register your intent to claim as soon as possible.

• Use the IBCA calculator to estimate your award and plan accordingly.

• If you have already paid inheritance tax, contact HMRC for a refund.

• Consider whether you want to receive your compensation as a lump sum or regular payments—both options are exempt from inheritance tax.

• Discuss your wishes with your family and update your will to reflect your intentions.

If you’re unsure about any aspect, your claim manager can help you understand your options and guide you through the process.

7. Frequently Asked Questions

Does the tax exemption apply to all compensation payments?
Yes, all payments made under the Infected Blood Compensation Scheme are exempt from inheritance tax, regardless of how or when they are passed down.

What if I already received an interim payment?
Interim payments are also covered by the exemption. If inheritance tax was paid on these, you can request a refund from HMRC.

Will this affect my means-tested benefits?
No, compensation payments do not impact eligibility for means-tested benefits.

How do I prove the source of funds to HMRC?
Keep all documentation from IBCA and any correspondence about your compensation. If you need to claim a refund, include these documents with your request.

What if I want to gift the money before I die?
You can gift compensation payments during your lifetime without triggering inheritance tax. Make sure to keep records of any gifts and inform your beneficiaries about the exemption.

8. Conclusion

The exemption of infected blood compensation from inheritance tax is a vital step in recognising the injustice suffered and protecting the financial future of victims and their families. By understanding your eligibility, calculating your award, and keeping thorough records, you can ensure your compensation is received in full and passed on without tax deductions. If you have already paid inheritance tax, act quickly to reclaim what you’re owed. For further support, your claim manager and IBCA resources are there to help you every step of the way.