The short version: The Loan Charge is a tax HMRC introduced to tackle disguised remuneration schemes. If you were paid through loans that were never meant to be repaid, HMRC wants the Income Tax and National Insurance that should have been paid at the time.
What were these schemes?
Instead of paying you a normal salary, employers would route money through a third party as a “loan.” Because loans aren’t taxable income, this avoided tax. The loans were never expected to be repaid. HMRC considers this tax avoidance.
Who’s affected?
People who used these schemes, often contractors, and sometimes without fully understanding what they were signing up for. Some were advised by accountants or agencies that the arrangements were legitimate.
What changed?
HMRC brought in the Loan Charge to recover unpaid tax on loans made after a certain date. After criticism, the rules were adjusted. You might be able to spread the bill over multiple years, and some older loans are no longer covered if you disclosed them properly at the time.
What should you do?
If you’ve received a Loan Charge notice or used these schemes, get advice. There may be options for settling or appealing, but the situation is complex.
Worried about the Loan Charge? Get in touch and we’ll help you understand your position.
