The Loan Charge applies to people who received ‘non-taxable’ loans as a way to avoid income tax and National Insurance. HMRC calls these arrangements ‘disguised remuneration’ or ‘loan schemes’. The Loan Charge applies to loans received after 9 December 2010.

The Loan Charge was introduced in 2017 to counter what HMRC considered to be tax avoidance, treating loans received from arrangements as taxable income in the 2018/19 tax year. According to the Government, approximately 50,000 people are affected.

This charge has always been a controversial piece of tax legislation. It has returned to the spotlight with significant reforms announced in the November 2025 Budget.

Loan Charge settlement: What are the key changes?

HMRC will create a new settlement opportunity and has accepted numerous changes to settlement terms including:

Each affected taxpayer will receive an automatic deduction of £5,000 to their Loan Charge liability

HMRC will no longer charge late payment interest on liabilities relating to the 2018/19 loan charge

HMRC will not charge inheritance tax liabilities

The tax calculation will be based on the years in which the income was earned rather than all taxed as income in 2018/19; potentially resulting in a significant reduction for taxpayers

Historic promoter fees can now be deducted when calculating the taxable loan amount, capped at £10,000 per year.

Extended payment plans of up to five years, or ten years in certain cases, will be made available. Where affordability remains an issue, HMRC may consider sub-standard offers.

HMRC will not seek penalties unless there is clear evidence of egregious behaviour.

Total reductions are to be capped at £70,000 (excluding IHT)

Key advantages of the new Loan charge settlement terms

The reforms clearly signal a more appeasing approach from HMRC to those who have not yet settled. Key advantages include:

The new terms may provide a more attainable path to closure for those who struggle with the retrospective nature of the original charge

The combination of potentially lower tax rates, deductions, interest and IHT relief means taxpayers are likely to have a lower liability and reduced risk of financial hardship

Potential drawbacks and lack of clarity

The reforms are designed to have positive effects, but several important complications and nuances remain.

Thousands of taxpayers affected by the Loan Charge have already settled. It is unclear whether any of the new reliefs will be extended to these taxpayers. Despite HMRC’s Charter principle of equal treatment amongst taxpayers, these new reforms may create a disparity between early settlers and those who waited.

Thousands of individuals are currently under enquiry for the years preceding the 2018/19 Loan Charge. The recent announcements did not specify whether these settlements will follow the new terms announced in November 2025.

We have discussed with HMRC’s Counter Avoidance policy team, and while The specific operational terms of the new settlement opportunity are not fully known, including if or how some of the uncertainties may be dealt with. From our discussions with HMRC’s Counter Avoidance policy team we understand settlement terms are likely to be released following Royal Assent of the Finance Bill, expected in March 2026 at the latest.

The Loan Charge has been a flagship anti-avoidance measure. These reforms raise the question whether HMRC would adopt similar approaches for other anti-avoidance arrangements, or whether this is a one-off.

HMRC’s historic approach

HMRC’s approach to collecting Loan Charge debts has been criticised by professional bodies and parliamentary committees. The House of Lords Economic Affairs Committee has previously described HMRC’s actions as “aggressive”, with many taxpayers being pushed to financial hardship and even bankruptcy.

Although the last reforms announced in 2021/22 eased initial tensions, concerns persisted which prompted a further review of the Loan Charge and additional changes announced in the November 2025 Budget.

What should affected taxpayers about the Loan charge settlement?

For anyone still exposed to the Loan Charge or under enquiry in relation to similar arrangements, the Government’s response to the second Loan Charge review offers the opportunity to re-evaluate your tax position. The new settlement terms could make a previously unaffordable liability more manageable.