Tax treatment — payments made under the Capture Redress Scheme
Published 30 October 2025
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Who is likely to be affected
Postmasters who receive compensation payments under the Capture Redress Scheme (CRS).
General description of the measure
These measures exempt compensation payments made under the CRS from Income Tax, Capital Gains Tax, Corporation Tax (where applicable), National Insurance contributions, and relieve them from Inheritance Tax. The Department for Business and Trade are launching the CRS to provide redress to postmasters affected by accounting shortfalls caused by the Capture software, which preceded Horizon.
Policy objective
To ensure fairness and efficiency in the tax system by exempting compensation payments under the CRS from tax and National Insurance contributions. These measures support the government’s commitment to delivering timely and full redress to postmasters affected by historical IT failures, without imposing further administrative or financial burdens.
This avoids any administrative burden on the recipients as they will not have to report receipt of these payments to HMRC, and it adheres to the principles and precedents of similar Horizon related compensation schemes that were launched by Post Office Limited or the Department for Business and Trade.
This will be achieved by two statutory instruments, one of which will exempt the payments from Income Tax, Capital Gains Tax, Corporation Tax (where applicable) and will relieve the payments from Inheritance Tax. The second statutory instrument will exempt the payments from National Insurance contributions.
Background to the measure
The CRS was announced by the Department for Business and Trade following findings that there was a reasonable likelihood that the Capture software, used in the 1990s, could have caused accounting shortfalls for postmasters, leaving postmasters to pay back these shortfalls to the Post Office. On 17 December 2024, the Minister for Services, Small Business and Exports committed to compensating those affected.
On 27 October 2025, the Exchequer Secretary to the Treasury announced that payments in the CRS would be exempt from tax and National Insurance contributions.
Detailed proposal
Operative date
The measure will have effect on 20 November 2025.
Current law
Current law is included in Schedule 15 of the Finance Act 2020 for Income Tax, Capital Gains Tax, and Corporation Tax exemptions as well as relief from Inheritance Tax.
The law relating to Class 1 National Insurance contributions is:
- sections 3(2) and (3) of the Social Security Contributions and Benefits Act 1992
- sections 3(2) and (3) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992
- part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001
Proposed revisions
Statutory Instruments will be laid to exempt payments made under the CRS from Income Tax, Capital Gains Tax, Corporation Tax (where applicable), National Insurance contributions, and relieve them from Inheritance Tax.
For Income Tax and related exemptions, amendments will be made under Schedule 15 of the Finance Act 2020. For Inheritance Tax, a separate exemption will be introduced in line with previous Post Office compensation schemes.
Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001 is to be amended by the insertion of a new paragraph after paragraph 32 to disregard the payments from Class 1 National Insurance contributions.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| Empty | Empty | Empty | Empty | Empty | Empty |
The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at Budget 2025.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure is expected to have no impact on individuals’ experience of dealing with HMRC. No impact is expected on family formation, stability or breakdown.
Equalities impact
An individual may be affected by this measure regardless of their protected characteristics. If a protected group is overrepresented in this population, then it will be disproportionately impacted. HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot determine conclusively if there are any equality impacts.
Impact on business including civil society organisations
There is no impact on businesses as this measure only affects individuals.
This measure is not expected to disproportionately impact civil society organisations.
Operational impact (£ million) (HMRC or other)
There are no operational impacts on HMRC. The Department for Business and Trade is expected to manage the administration of the schemes with existing staff resources.
Other impacts
Other impacts have been considered, and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Aslihan Grantham by emailing employmentincomepolicy@hmrc.gov.uk.
Declaration
Daniel Tomlinson (MP), Exchequer Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.