Policy paper

Loan charge review

Published 26 November 2025

Who is likely to be affected

Individuals and employers liable to the loan charge who have not resolved their position with HMRC and paid their outstanding tax liabilities.

General description of the measure

In January 2025 an independent review of the loan charge was commissioned by the government. The review was published at Budget 2025, alongside the government’s response. The government has announced that it is accepting all but one of the review’s recommendations and in some areas is going further, including writing off £5,000 of each individual’s liability in addition to the review’s recommendations. The review recommends that the government introduce a settlement opportunity to encourage those who have not settled their position with HMRC to do so. This measure will give HMRC the power to administer the settlement opportunity.

The settlement opportunity will substantially reduce the amount that they have to pay, particularly those with the lowest liabilities (typically those on the lowest incomes). Where people decide to settle, most individuals could see reductions of at least 50% in their outstanding loan charge liabilities and an estimated 30% of individuals could be able to settle without paying anything.

For those that decide to settle, the key features of the settlement opportunity are that:

• instead of being charged at the tax rates that apply to the loan charge and all other income in 2019, the new offer will be worked out based on the tax rates they would have paid in the years that loans were made
• the new amount will be reduced to account for historic promoter fees, up to a maximum discount of £10,000 per year that a taxpayer used a loan scheme
• further to the recommendations in the review, the new amount will be reduced by £5,000, reducing the amount that many people could pay to zero
• no late payment interest will be charged — reducing the amount that many could pay by around 20%
• any inheritance tax already due because of the use of loan schemes covered by the settlement will be written off
• where a person is unable to pay the new amount in full immediately, HMRC will agree a payment arrangement tailored to their ability to pay — anyone can decide to pay the new liability over five years, without having to discuss affordability with HMRC — forward interest will apply as normal if a person decides to pay via instalments
• the maximum reduction for any one person will be no greater than £70,000 on what the person already owed because of the loan charge
• promoters of tax avoidance schemes will not be able to access the new settlement opportunity

Policy objective

In commissioning the review, the government recognised the concerns about the loan charge and the need for action to bring the matter to a close. The review was asked to explore ways to remove the barriers preventing those who want to settle their avoidance with HMRC from doing so, while also ensuring that appropriate support is in place for those subject to the loan charge.

This measure is intended to implement the recommendations of the review and meet the objectives that were set for the review by the government. The government has accepted all but one of the recommendations of the review and in some areas is going further, making the settlement opportunity more progressive.

Background to the measure

Disguised remuneration schemes are tax avoidance schemes that seek to avoid income tax and National Insurance by disguising income as another form of payment, which is claimed to be non-taxable (typically a loan).

Disguised remuneration schemes have been considered by the courts. In the most notable case in 2017, the Supreme Court agreed with HMRC that schemes that redirect earnings and ultimately pay them in the form of loans do not succeed in avoiding tax. In a further decision in 2022, the Court of Appeal confirmed that even where other parties (such as employers or agencies) have obligations to operate PAYE, the liability for income tax is that of the employee.

The loan charge was announced at Budget 2016 and introduced into law through Finance (No.2) Act 2017. Its purpose was to tackle the historical use of these contrived tax avoidance schemes.

Following concerns expressed by Parliamentarians and others, the previous government commissioned an independent review of the loan charge in 2019, led by Lord Morse.

However, the government recognised that concerns continued to be raised about the loan charge and that some felt strongly that it had not been handled appropriately. In January 2025 the then Exchequer Secretary to the Treasury commissioned Ray McCann, a former president of the Chartered Institute of Taxation, to lead a new independent review of the loan charge.

The overarching objectives of the review were to:

• bring the matter to a close for those affected
• ensure fairness for all taxpayers
• ensure that appropriate support is in place for those subject to the loan charge

The review was specific to the loan charge and did not consider tax avoidance that is outside of its scope. That is, the review only considered disguised remuneration scheme use between and including 9 December 2010 and 5 April 2019 that is in scope of the loan charge legislation (Schedules 11 and 12 to the Finance (No.2) Act 2017). It only considered both outstanding loan charge liabilities and the related outstanding liabilities arising from the underlying income received via this use of disguised remuneration schemes.

Detailed proposal

Operative date

This measure will have retrospective effect from 5 April 2019. This is the date from which loan charge legislation took effect on loans that were still outstanding.  

Current law

Current law relating to employment income provided through third parties is in Part 7A of the Income Tax (Earnings and Pensions) 2003, commonly referred to as the ‘disguised remuneration rules’. 

Current law relating to the loan charge is in Schedules 11 and 12 to Finance (No. 2) Act 2017. These provisions were amended by section 15 and Schedule 2 to Finance Act 2020. 

Proposed revisions

Legislation will be introduced in Finance Bill 2025-26 to require the Commissioners for His Majesty’s Revenue and Customs to establish a new loan charge settlement scheme. It outlines the requirements of the scheme, the people eligible, and how settlement amounts will be calculated under the scheme.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
-25	-95	-30	+35	-155	-95

These figures are set out in Table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.

Macroeconomic impact

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

Impact on individuals, households and families

This measure will impact approximately 32,000 individuals who have an outstanding loan charge liability.  

Those individuals who choose to make use of the settlement opportunity will see a reduction in their liabilities of up to £70,000. Most individuals could see reductions of at least 50% in their outstanding loan charge liabilities and an estimated 30% of individuals could be able to settle without paying anything.  

This measure is expected overall to impact individuals experience of dealing with HMRC because the settlement opportunity will reduce barriers preventing individuals from settling their avoidance use with HMRC. 

Equalities impacts

It is anticipated that this measure will reduce the tax liabilities of individuals with outstanding loan charge liabilities. If a protected group is overrepresented in this population, then it will be disproportionately impacted.

The median age of the wider population with relevant disguised  remuneration scheme usage  subject to the loan charge is 53. This includes individuals who have fully paid, or those who settled prior to the loan charge arising. Individuals of typical working age (25-64) are estimated to be overrepresented (87%) compared to their prevalence in the UK adult population (63%).  

HMRC does not currently hold data on the other protected characteristics of individuals impacted by this measure and so cannot make an assessment of the impacts on those with shared protected characteristics.

Administrative impact on business including civil society organisations

The measure is expected to have a negligible impact on businesses. The approximately 5,000 employers anticipated to be eligible for the settlement opportunity will see a reduction in their tax liabilities where they choose to take advantage of the opportunity. The businesses likely to be affected will be the small number of businesses that used disguised remuneration schemes to reward directors, key employees, or where the owners attempted to extract funds from their companies without paying the right tax.  

One-off costs for businesses will include familiarisation with the terms of the settlement opportunity. As this will be a time-limited opportunity, it is not anticipated that there will be any ongoing costs. 

This measure is expected to impact a small number of civil society organisations that provide advice to taxpayers who may see an initial increase in contact from individuals seeking support when engaging with HMRC to take up the settlement opportunity.  

One-off costs for civil society organisations will include familiarisation with the terms of the settlement opportunity. As this will be a time-limited opportunity, it is not anticipated that there will be any ongoing costs. 

This measure is expected overall to impact businesses’ experience of dealing with HMRC because the settlement opportunity will reduce barriers preventing employers from settling their avoidance use with HMRC.  

Operational impact (£ million) (HMRC or other)

This measure should have no operational impacts for HMRC. The settlement opportunity will be delivered through HMRC’s existing resources. HMRC has assigned dedicated caseworkers to each individual within scope of the settlement opportunity. This caseworker will act as a named point of contact for taxpayers, helping to support them through the settlement process towards resolution.  

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

Consideration will be given to evaluating aspects of the policy, including the impact on individuals and employers.

Further advice

If you have any questions about this change, contact lcreviewspoc@hmrc.gov.uk.