Policy paper

Legislation for payments made under the Horizon Family Members Redress Scheme

Published 1 July 2026

Who is likely to be affected

Family members of postmasters whose lives were significantly affected by failures in the Horizon IT system.

General description of the measure

The measure ensures that compensation payments made under the Horizon Family Members Redress Scheme are not subject to Income Tax or Capital Gains Tax and are relieved from Inheritance Tax. This means that eligible individuals will receive the full value of their compensation without any deductions or the need to engage with the tax system. Payments made under the scheme will not attract National Insurance contributions under existing legislation, and no changes are required.

Policy objective

The objective of this measure is to remove potential tax charges on compensation payments under the Horizon Family Members Redress Scheme. Without this legislation, such payments could be within the scope of existing tax rules.

The measure ensures that these payments are not subject to tax and provides clarity and certainty for recipients. It also removes the need for individuals to engage with the tax system in relation to these payments.

Background to the measure

The Government has committed to providing redress to close family members of postmasters who experienced significant impacts as a result of failures of the Horizon IT system.

The Department for Business and Trade are therefore designing the Horizon Family Members Redress Scheme for close family members of postmasters who were severely affected by the Horizon scandal.

Consistent with the approach taken for earlier Horizon related compensation schemes, consideration was given to the tax treatment of payments under the scheme to ensure individuals receive compensation in a fair and straightforward way.

This measure introduces the tax treatment for payments made under the scheme, ensuring a clear and consistent approach that aligns with established practice across similar compensation schemes.

Detailed proposal

Operative date

The measure will have effect on 22 July 2026.

Current law

Liability to Income Tax, governed by the section 401 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003, liability to Capital Gains Tax is governed by the Taxation of Chargeable Gains Act 1992, and liability to Inheritance Tax is set out in the Inheritance Tax Act 1984.

Proposed revisions

Schedule 15 to the Finance Act 2020 provides powers for the HM Treasury to exempt qualifying compensation payments from Income Tax and Capital Gains Tax, and to provide relief from Inheritance Tax where specified in regulations. The measure will be implemented using the powers in Schedule 15 to the Finance Act 2020. This measure specifies that compensation payments made under the Horizon Family Members Redress Scheme are qualifying payments for the purposes of that Schedule.

The regulations are intended to be laid before the House of Commons before the Summer recess, with effect applying as set out above.

Summary of impacts

Exchequer impact (£ million)

2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
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 a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure exempts payments made under the Horizon Family Redress Scheme from Income Tax, Capital Gains Tax and relieves the payments from Inheritance Tax.

Individuals will not need to do anything differently to what they do now as the exemption will be automatically applied to those payments.

This measure is expected to have no impact on individual’s experience of dealing with HMRC.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

This measure will exempt payments made under the Horizon Family Members Redress Scheme from Income Tax, Capital Gains Tax and relieve them from Inheritance Tax, ensuring that recipients are not disadvantaged by the tax treatment of these payments.

This measure may apply to individuals regardless of their protected characteristics. HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot assess if there are any disproportionate impacts to protected groups.

Administrative 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.

Organisational 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 Small Measure evaluation threshold applies. 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 email, at employmentincomepolicy@hmrc.gov.uk.

Declaration

Dan 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.