In a written statement, the Treasury confirmed that no income tax, capital gains tax, national insurance contributions, corporation tax or inheritance tax will be payable on compensation for postmasters affected by the Horizon scandal.

The exemption from tax will affect compensation payments made to postmasters whose convictions are overturned by the Post Office (Horizon System) Offences Bill or by those who benefit from a £75,000 fixed sum payment on the Horizon shortfall scheme.

Nigel Huddleston, financial secretary to the Treasury said: ‘It is the government’s priority to take swift action to ensure affected postmasters receive full and fair financial redress with little administrative burden.

‘That is why the government will ensure that no income tax, capital gains tax, national insurance contributions, corporation tax or inheritance tax is payable on compensation to be paid to postmasters whose convictions are overturned by the upcoming legislation or by those who benefit from a £75,000 fixed sum payment on the Horizon shortfall scheme.’

The government will legislate via secondary legislation to exempt these payments in due course.