The UK government is introducing new regulations (via the Finance Bill 2025-26) to ensure that Infected Blood Compensation payments are treated fairly for Inheritance Tax purposes. These rules are designed to prevent the compensation from being taxed if you pass it on to loved ones.
The rules extend the existing relief from inheritance tax (IHT) for compensation payments made from the Infected Blood Compensation Scheme and the Infected Blood Interim Compensation Payment Scheme (‘infected blood compensation payments’)
Depending on your circumstances, different rules apply:
If you are the Infected or Affected Person
If you received the compensation directly because you were infected or affected, the money remains free from Inheritance Tax upon your death.
You can also give this money away during your lifetime without it attracting an Inheritance Tax charge. This rule applies retrospectively to gifts you may have already made. Any such gifts must be recorded in writing and signed by the infected or affected person, even if the gift has already been made. Lifetime transfers of compensation payments made by infected or affected people will not attract an IHT charge.
If you are a “First Living Recipient” (e.g., a Partner, Child, or Executor)
If you received compensation on behalf of someone who has died, you are classified as a “First Living Recipient.” The new rules ensure that this money does not attract Inheritance Tax when you eventually pass away.
You can also give this money away tax-free while you are alive, provided it is a “Qualifying Gift.” To qualify, the gift must be made within a specific time limit:
- Payments received before 4 December 2025: You have until 4 December 2027 to make the gift.
- Payments received on or after 4 December 2025: You have 2 years from the date you received the payment to make the gift.
Our advice on IHT adminstration
These are the rules based on our understanding as of the 20th of January 2026 [we intend to update when we know more].
We encourage you to:
- Continue to seek professional advice. Rules can change.
- Keep copies of your deed of gift alongside other important legal information, such as your Wills and LPA.
- Make sure your executors are aware of your plans and what you have done.
- It is good practice to keep a copy of your assets and relevant information alongside your Will for the future.
Why do you need this tool
The legislation strictly requires that all such gifts—whether you are an infected person or a First Living Recipient—must be recorded in writing and signed by you. This applies even if you gave the money away in the past.
This tool helps you generate a formal Deed of Recording. This document acts as your written evidence to ensure the gift meets the requirements for tax relief.
This tool has been created to assist the infected blood community in navigating the administrative nuances of recording lifetime gifts from IBCA compensation payments. Please be aware that at the time of writing 15 Jan 2026, the relevant legislation is still working its way through Westminster and is subject to final Parliamentary approval. You can view the full text and track the progress of the Bill here: Finance (No. 2) Bill.
This tool does not constitute legal, tax, or financial advice.
The documents generated by this tool are templates designed to assist with record-keeping requirements under Ministerial Statement HLWS1214 and Finance Bill 2025-26. While every effort has been made to ensure accuracy based on current legislation, tax laws can be complex and subject to individual circumstances.
Edale strongly recommends that you have any Deed of Gift reviewed by a qualified solicitor or tax adviser before signing, particularly if the gift involves significant sums or if you are unsure about your specific Inheritance Tax (IHT) liability.
IBCA Gift Recorder
Select your circumstances to generate the correct legal deed.
Use this to generate a Statutory Relief Record. This provides formal evidence of the date you gave the money away.
Note: Under the rules, gifts made within 2 years of receipt (or 2 years from 4 Dec 2025) are exempt from Inheritance Tax.
Use this to generate a Statutory Relief Record.
Note: Under HLWS1214, gifts made within 2 years of receipt (or 2 years from 4 Dec 2025) are exempt from Inheritance Tax.
(LIVING RECIPIENT)
THIS DEED is made on the
BY:
of (“The Donor“).
IN FAVOUR OF:
of (“The Beneficiary“).
(A) The Donor received a compensation payment from the Infected Blood Compensation Authority (“IBCA”) on .
(B) The Donor wishes to make an absolute gift of part or all of these funds to the Beneficiary.
(C) The Donor intends for the gift(s) in the Schedule to constitute “Qualifying Gifts” consistent with statutory and HMRC definitions, exempting them from Inheritance Tax.
The Donor hereby CONFIRMS, DECLARES and COVENANTS as follows:
IN WITNESS WHEREOF this document has been executed as a Deed.
SIGNED as a DEED by
In the presence of (Witness):
(Signature of Witness)Name: ______________________
Address: ____________________
(FIRST LIVING RECIPIENT)
THIS DEED is made on the
BY:
of (“The Donor / First Living Recipient“).
IN FAVOUR OF:
of (“The Beneficiary“).
(A) (“The Deceased”) was an eligible person under the Infected Blood Compensation Scheme who died prior to the receipt of compensation.
(B) The Donor, acting as the “First Living Recipient” (as defined in Ministerial Statement HLWS1214), received a compensation payment in respect of the Deceased on .
(C) The Donor intends for the gift(s) in the Schedule to constitute “Qualifying Gifts” consistent with statutory and HMRC definitions, exempting them from Inheritance Tax.
The Donor hereby CONFIRMS, DECLARES and COVENANTS as follows:
IN WITNESS WHEREOF this document has been executed as a Deed.
SIGNED as a DEED by
In the presence of (Witness):
(Signature of Witness)Name: ______________________
Address: ____________________
Timeline of infected blood IHT developments and practical guidance
- 194/3/2020: Schedule 15 of the Finance Act 2020 introduced, creating a mechanism for IHT relief for “qualifying payments” from statutory compensation schemes (schemes are “switched on” via later regulations).
- 4/9/2024: Legislation confirms that infected blood compensation payments were already relieved from IHT on the death of the infected or affected person eligible for compensation.
- 26/11/2025: 2025 Budget contained a power to make changes to the IHT treatment of infected blood compensation schemes in secondary legislation.
- 18/12/2025: Statement to the House of Commons operational details including:
- “Any [lifetime] gifts must be recorded in writing and signed by the infected or affected person, even if the gift has already been made.”
- No HMRC collection of IHT in the relevant cases from 26 November 2025
- Refunds possible where IHT was previously paid
- Early 2026: Legislated through the Finance Bill 2025–26, this provides the Treasury and Ministers with the power to allow regulations to deliver the detailed IHT credit / qualifying gift mechanics (i.e., the change relies on a statutory power + secondary legislation)
Infected Blood Compensation & Inheritance Tax (IHT) FAQ
Below is a set Questions and Answers based on the ministerial statement (HCWS1209) and the updated financial guidelines. Edale has been selected as a financial adviser by the Cabinet Office to IBCA and these aids have been developed as part of the delivery of financial guidance.
Q: What is the new Inheritance Tax (IHT) relief for Infected Blood compensation?
A: Under the statement made on 18 December 2025 (HCWS1209), the government has extended IHT relief to cover cases where an eligible person dies before their compensation is paid. This ensures that the “first living recipient” (such as a bereaved partner or child) receives an IHT credit. This credit allows them to pass on the value of that compensation upon their own death without an IHT charge.
Q: Can I gift my compensation payment to family members without paying tax?
A: Yes. If you are the “first living recipient” of a compensation payment, you have a two-year window to make “qualifying gifts” of that money to others. These gifts will not attract an IHT charge, and the tax-free status (the IHT credit) will follow the gifted amount to the new recipient.
Q: What are the deadlines for making these tax-free gifts?
A: The two-year window depends on when you received the payment:
• Payments received before 4 December 2025: You have until 4 December 2027 to make qualifying gifts.
• Payments received after 4 December 2025: You have two years from the date of the payment to make qualifying gifts.
• Note: All such gifts must be recorded in writing and signed by the person making the gift.
Q: Does this relief apply to people who were “affected” rather than “infected”?
A: Yes. The ministerial statement confirms that these IHT changes apply regardless of whether the person originally eligible for compensation was an “infected” person or an “affected” person (such as a partner, parent, or child).
Q: What if I have already paid Inheritance Tax on a compensation payment?
A: As of 26 November 2025, HMRC stopped collecting IHT on these payments in the specified circumstances. If IHT was paid on these amounts before the new changes were announced, a refund can be claimed from HMRC.
Q: Where can I find detailed technical guidance on these rules?
A: For comprehensive professional guidance on how these rules interact with estate planning and the Finance Bill, you should refer to the STEP Infected Blood Guidance (PDF), which contains vital data for legal and financial advisors.