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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →The Loan Charge is a UK tax measure aimed at certain outstanding loans used in disguised remuneration schemes. It became controversial because the original rules could bring loans from several years into charge in one later tax year, including in some cases where HMRC had not opened an enquiry. Parliament narrowed the charge after the 2019 Morse Review, and the government announced a new settlement opportunity in November 2025 for people and employers with outstanding liabilities. The tax treatment of the original schemes and the fairness of the later charge are related, but distinct, questions.
What is the Loan Charge?
Announced at Budget 2016 and legislated in the Finance (No. 2) Act 2017, the Loan Charge was designed to address historic disguised remuneration arrangements. These arrangements paid people through loans that were presented as non-taxable, rather than as ordinary salary or other taxable income. The measure is not a general tax on personal loans.
The original Loan Charge mechanism brought certain outstanding disguised remuneration loans into a later tax year, 2018–19. That mechanism should be distinguished from any income tax or National Insurance liability that may have arisen under the law applying when the income was earned. A loan falling outside the Loan Charge does not, by itself, establish that no underlying tax is due.
The government’s stated policy case is that the schemes did not successfully avoid tax. It cites the Supreme Court’s 2017 Rangers decision in support of that position. That issue concerns the tax treatment of the schemes; it does not, on its own, settle whether the later Loan Charge was fair in design or administration.
Why is the Loan Charge controversial?
Criticism has focused on how the charge worked, who it reached and how long cases remained unresolved. The original rules could aggregate outstanding loans from multiple years in a single later tax year. Critics also objected that some people were brought within the charge despite HMRC not having opened an enquiry or otherwise protected its position at the time.
The dispute therefore has two connected strands: whether disguised remuneration income was taxable, and whether imposing a later charge on outstanding loans was a fair way to collect tax. The government maintains that users received income that was not properly taxed. Its November 2025 response also acknowledged that some people had not been properly informed of scheme risks by those who benefited from the arrangements. Those are the government’s stated views, not findings about every individual taxpayer.
In that response, Exchequer Secretary to the Treasury Dan Tomlinson acknowledged both the controversy and shortcomings in collection: “I acknowledge that the history of the loan charge is controversial, that HMRC has not always got it right in the way it has sought to collect loan charge liabilities, and that it has taken too long to get to this point.”
Who is affected by the Loan Charge?
The rules may matter to individuals and employers involved in disguised remuneration arrangements, but a person’s position depends on their particular facts. Relevant factors include when the loans were made, which tax years the income relates to, what was disclosed on tax returns, whether HMRC opened an enquiry or issued an assessment, whether anything has already been settled or paid, and whether other disguised remuneration liabilities are involved.
- Loan Charge liability: whether the outstanding loans fall within the statutory charge after the 2020 changes.
- Underlying tax liability: whether tax may be due under the rules for the years in which the income arose, including where the Loan Charge does not apply.
- Case status: whether HMRC has an open enquiry or assessment, and whether the liability remains outstanding.
- Employer involvement: whether an employer has liabilities connected to the arrangements as well as, or instead of, an individual.
These distinctions can affect both the amount due and which resolution routes are available. The general announcement of a settlement offer does not determine an individual’s eligibility or settlement figure.
What changed after the Morse Review?
After the Chancellor commissioned an independent review led by Sir Amyas Morse in 2019, the government amended the Loan Charge through the Finance Act 2020. The review considered submissions from 37 tax and legal experts and more than 700 personal testimonies, according to the HM Treasury and HMRC evidence summary.
- Loans made before 9 December 2010: excluded from the Loan Charge.
- Loans made from 9 December 2010 to 5 April 2016: not subject to the charge where the taxpayer made “reasonable disclosure” of the scheme and HMRC did not act to protect its position, for example by opening an enquiry.
- Eligible outstanding balances: could be spread across the 2018–19, 2019–20 and 2020–21 tax years.
The exclusion from the Loan Charge is not an automatic cancellation of any underlying tax liability. An enquiry or assessment concerning the original tax years may still matter. HMRC’s 2020 implementation report estimated that the changes removed 11,000 individuals and 1,000 employers from the charge; those are historical estimates, not current totals.
The fiscal estimates also changed over time. The House of Commons Library reports that the wider 2016 Budget package was initially expected to raise £3.2 billion over five years; by the 2022 Spring Statement the estimate was £3.4 billion over five years. Implementing the Morse recommendations was estimated to reduce the total yield by £620 million. These were estimates at different points, not a final tally of tax collected.
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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesWhat does the latest settlement offer mean?
At Autumn Budget 2024, the government committed to another independent review. In January 2025 it appointed Ray McCann, a former president of the Chartered Institute of Taxation, to examine barriers to resolution and recommend support for settlement. In November 2025, the government accepted all but one of the review’s recommendations, including its principal recommendation for a new settlement opportunity for outstanding Loan Charge liabilities.
The government describes the opportunity as a final chance to resolve outstanding cases through settlement. Its response says the offer is for individuals and employers who have not yet settled and paid outstanding Loan Charge liabilities, including related underlying disguised remuneration tax liabilities. If a person has both Loan Charge liabilities and other disguised remuneration liabilities, the response says all disguised remuneration avoidance must be settled to use the offer, while the new concessions apply only to liabilities within the Loan Charge.
How the announced settlement is designed
- Liabilities are recalculated by the years in which income was earned rather than stacking the income into a single year.
- The calculation accounts for promoter fees through a proportion of scheme income.
- The response says late-payment interest will be suspended and that penalties and inheritance tax will not be pursued through this settlement.
- The government says it will write off the first £5,000 of each person’s liability, with the maximum write-off capped at £70,000.
- Employers are to have access to the same settlement terms as employees.
The government estimates that most individuals could see reductions of at least 50% in outstanding Loan Charge liabilities and that about 30% could have those liabilities written off entirely. These are projections for the eligible population, not promised outcomes for any particular case. Operative terms, eligibility and the application process should be checked in current HMRC guidance and the legislation before making a decision.
Payment plans and other routes
The response accepts five-year payment plans by default and says HMRC will consider longer arrangements where needed. It rejected a proposed ten-year maximum, saying longer plans may be considered, and committed to clarifying the process for people who cannot pay. For an affected taxpayer, the practical comparison is between this settlement opportunity and the existing assessment, appeal or settlement route, including how each calculates liabilities by income year and what payment terms apply. The right comparison depends on the person’s case; qualified, independent tax advice may be important.
What is known about unresolved cases?
In a written parliamentary answer dated 9 June 2026, a Treasury minister said the government had accepted all but one of the review’s recommendations and introduced Finance Act legislation for the settlement offer. The minister said HMRC does not make detailed case-by-case forecasts of total resources because resolution depends on variables including whether taxpayers engage with HMRC.
The written question referred to 32,000 unsettled individual cases, but the minister did not confirm that figure or give a verified total cost forecast. It should not be treated as an official count of current unresolved cases.
Quick Recap
What should someone with a possible Loan Charge liability do?
- Gather the records. Collect scheme and loan documents, tax returns, correspondence with HMRC, assessments or enquiry notices, payment records, and any previous settlement paperwork.
- Map the years and disclosures. Identify when income was earned and loans were made, what was reported to HMRC, and whether HMRC took action to protect its position. These details can affect the 2020 exclusions and any underlying tax position.
- Separate the liabilities. Establish which amounts relate to the Loan Charge and which, if any, are underlying disguised remuneration liabilities outside it. Do not assume that an exclusion from the charge resolves an open enquiry or assessment.
- Check current official terms. Use the latest HMRC guidance and applicable legislation to confirm whether the settlement opportunity is open, what eligibility tests apply, what information is required and how a calculation is made.
- Compare before committing. Consider the settlement calculation, any existing appeal or assessment route, payment-plan terms and the effect of settling related liabilities. A qualified independent tax adviser can assess the facts and explain case-specific options.
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