Payments made from a trust to victims of thalidomide are to be tax-free, the government has announced.
The Treasury said the move would be worth £1m a year in lower tax and increased tax credits for recipients.
Until now some payments from the Thalidomide Trust had counted towards taxable income, adding to tax bills.
The trust was set up in 1973 to support people who had disabilities caused because their mothers had taken the drug thalidomide during pregnancy.
The trust has received funds from the government and Distillers - later Guinness, now Diageo - who made the drug.
By 2001, it was worth more than £100m.
The change comes into effect from 5 August 2004.
Then payments from the trust to victims will be discounted as "income" for tax purposes and for entitlement to tax credits.