Received a Loan Charge Settlement Scheme letter from HMRC? What do you need to do now?

This new Loan Charge Settlement Scheme introduces incentives not available under previous HMRC settlement terms, including automatic deductions, relief from late payment interest, and the potential write-off of certain Inheritance Tax liabilities.

For some taxpayers, the revised Loan Charge Settlement Scheme could significantly reduce the amount payable and, in limited cases, result in no liability at all.

If you receive a loan charge settlement letter, or believe you may be eligible for the scheme, it is important to understand your options and seek advice before making any decisions. 

Please call: 020 7 0635 000

What is the Loan Charge Settlement Scheme?

The Loan Charge Settlement Scheme applies to outstanding loan charge liabilities linked to disguised remuneration arrangements, often known as loan schemes. These typically involved income being received as loans or similar payments that were treated as non-taxable.

Following the independent review, the government revised how certain loan charge liabilities are settled.

The revised Loan Charge Settlement Scheme, implemented through the Finance Act 2026 and associated regulations, gives eligible individuals and employers a further opportunity to settle long-running disputes with HMRC.

For some taxpayers, the revised terms may reduce the amount payable or, in limited cases, remove the liability altogether.

Why the new Loan Charge Settlement Scheme may be attractive

One of the most significant features of the revised scheme is the introduction of a simplified settlement calculation. HMRC will now calculate a notional tax and National Insurance position using prescribed rules rather than the full complexity of the underlying historical liabilities.

The revised approach uses a simplified calculation and includes reliefs designed to make settlement more achievable. These include:

• Deductions reflecting promoter fees.
• A further £5,000 reduction in the final settlement calculation.
• A cap that limits the extent to which settlement liabilities can exceed certain thresholds.

The scheme also removes late payment interest from the settlement calculation, may allow extended payment arrangements and indicates that penalties will not usually apply unless more serious behaviour is identified.

For affected taxpayers, these features may make an HMRC settlement offer materially lower than the amount otherwise in dispute.

Who may be affected by the changes to the Loan Charge Settlement Scheme?

The scheme is relevant to:

• Individuals who participated in disguised remuneration arrangements and remain subject to the loan charge.
• Taxpayers with ongoing HMRC enquiries or appeals relating to loan charge liabilities.
• Individuals who have already received assessments but have not yet fully settled the position.
• Employers that still exist and may have PAYE and National Insurance liabilities arising from disguised remuneration arrangements.

Even if you have previously engaged with HMRC regarding the loan charge, it is worth considering whether the revised settlement terms may now apply to your circumstances.

What happens if an employer is involved in the Loan Charge Settlement Scheme?

The position can be more complex where an employer operated the loan scheme.

Where an employer still exists and was required to account for PAYE and National Insurance, HMRC will generally seek payment from the employer first. However, it may still write to affected individuals so all parties understand their options.

Employer liabilities, personal liabilities, insolvency issues and personal service companies can interact in complex ways, so the position should be reviewed before responding to HMRC.

The revised terms may also offer a route to write off certain Inheritance Tax liabilities linked to the underlying loan scheme, although this may require related arrangements, such as trusts, to be brought to an end.

What happens if you receive a Loan Charge Settlement Scheme offer?

HMRC has started issuing formal settlement offers and may ask for further information before confirming a figure. Each offer will include a response deadline, with at least 90 days to accept, so it is important to review the terms carefully and act promptly.

Before responding, check that HMRC’s loan details, tax years and calculations are accurate, and whether the offer covers all related liabilities, including Income Tax, National Insurance, interest, penalties and any Inheritance Tax exposure.

Seek specialist advice before accepting, rejecting or delaying a response, particularly where employers, appeals, trusts or previous settlement discussions are involved.

Should you accept the HMRC Loan Charge Settlement Scheme offer?

There is no single answer.

The right decision will depend on the accuracy of HMRC’s calculation, the years involved, any employer PAYE or National Insurance position, open appeals or enquiries, and your ability to pay.

Before accepting an HMRC settlement offer, it is important to understand how the figure has been calculated and how it compares with your other options.

What now?

The Loan Charge remains a complex area of tax dispute work, often involving long-running HMRC enquiries, assessments, appeals and litigation.

We can help you assess eligibility for the revised Loan Charge Settlement Scheme, review any HMRC settlement offer, check the calculations and consider the best course of action for your circumstances.