Loan Charge 2025 Review Guide: What the new settlement opportunity means for you

The government has published its response to the 2025 Loan Charge Review and confirmed that a new settlement opportunity will be legislated in the Finance Bill 2025–26. This creates a fresh route for individuals and employers with outstanding Loan Charge liabilities to settle on more affordable and transparent terms. The detailed rules will only take effect once Parliament has enacted the legislation, so any decision should be taken with care.

What does this guide cover at a glance?

The 2025 Loan Charge Review, led by Ray McCann, has now concluded. The government has accepted all but one of its recommendations and intends to introduce a new statutory settlement opportunity for those who have not resolved their Loan Charge liabilities. The proposed framework will allow HMRC to recalculate liabilities by reference to the years in which income was actually earned, apply standardised deductions that reflect promoter fees, remove £5,000 of liability per eligible individual and provide tailored time-to-pay arrangements. These measures remain subject to legislation and detailed guidance.

Anyone with an unresolved disguised remuneration or contractor loan issue is likely to face important decisions over the coming months. Early professional advice will help you understand the options, how the calculations may apply and whether wider financial consequences need to be managed alongside any tax settlement.

What does the 2025 Loan Charge review mean for you?

The Loan Charge was introduced through the Finance (No. 2) Act 2017 and is designed to address historic disguised remuneration schemes in which payments were presented as loans rather than taxable income.

• When originally enacted, the legislation applied to loans made from 6 April 1999.
• That position was later narrowed following the 2019 Morse Review and the enactment of the Finance Act 2020.
• As a result, the Loan Charge now applies only to outstanding disguised remuneration loans connected with income received between 9 December 2010 and 5 April 2019.

In practice, many schemes operated by routing payments through third parties, often overseas, with funds advanced as loans that were unlikely ever to be repaid. Courts have since confirmed that the underlying payments were taxable as income even where schemes relied on complex trust structures. The narrowing of the Loan Charge did not remove the substantial number of cases left unresolved, which led to ongoing engagements, hardship and criticism of HMRC’s approach. These issues prompted the commissioning of the 2025 Review.

In essence, the Loan Charge is a statutory backstop charge on certain outstanding disguised remuneration loans and remains governed by UK tax law applicable in England and Wales.

What did the 2025 Loan Charge review conclude?

The 2025 Loan Charge Review concluded that the previous HMRC settlement strategy was too rigid, did not reflect realistic affordability and did not distinguish fairly between different types of taxpayers. It found that

• lower income workers who were drawn into schemes without proper warnings faced disproportionate liabilities compared with high earning individuals who used the arrangements repeatedly.
• The Review also found that HMRC’s communication and enforcement approach had entrenched mistrust and made constructive engagement harder.

The Review recommended a more transparent and progressive settlement model with structured adjustments, clearer rules and greater emphasis on affordability. The government confirmed that it accepts all but one of the recommendations. The recommendation not taken forward was one that, in the government’s view, would have undermined the policy objective of bringing cases to a final and workable conclusion.

How is the government responding to the Review?

The government’s response, published with Budget 2025, confirms that new legislation will be introduced through the Finance Bill 2025–26 to create a statutory framework for a new, time-limited settlement opportunity. The government has indicated that HMRC will have the flexibility to agree settlements that differ from the strict statutory Loan Charge position, provided this falls within the powers granted by Parliament.

• The core elements of the intended framework include recalculating liabilities by spreading income across the correct years, applying standardised deductions to reflect promoter fees and writing off £5,000 of liability per eligible individual.
• A stronger emphasis on affordability is also expected, with HMRC encouraged to agree realistic time-to-pay arrangements.
• All elements remain subject to legislation and the publication of detailed HMRC guidance.

The government has also acknowledged the distress caused by the Loan Charge and has recognised that relationships between HMRC and affected taxpayers have been significantly damaged.

How will the new Loan Charge settlement opportunity work?

The detailed procedure will only be confirmed once the legislation has been enacted, but the Review and Budget materials indicate what the process is likely to involve.

• HMRC is expected to open a registration window for eligible taxpayers to express interest.
• After registration, taxpayers will be asked to provide information about their scheme use and the years involved.
• HMRC will then apply a standardised methodology to recalculate liabilities, spreading income across relevant years, applying promoter-fee deductions and removing £5,000 of liability where the conditions are met.
• A proposed settlement will then be issued. HMRC may have the ability to agree sub-statutory settlements within parameters set by Parliament.
• Once terms are agreed, the settlement is expected to bring the Loan Charge position for the relevant years to a close, subject to compliance with payment terms.
• The settlement opportunity will be time limited, and detailed guidance will only be published once the statutory framework is established.

Who can benefit from the settlement and who is excluded?

The settlement window is aimed at individuals and employers who have outstanding Loan Charge liabilities that have not been resolved through earlier settlement campaigns. It is not expected to be available to those who have already reached a formal settlement with HMRC. The opportunity is therefore targeted at unresolved cases rather than previously concluded agreements and is not intended to operate as a general amnesty.

Within the eligible population, HMRC is expected to differentiate according to the type of scheme, income level and vulnerability. The Review placed considerable emphasis on distinguishing between different groups to ensure a fairer and more workable outcome.

How will HMRC calculate what I now owe?

HMRC will begin with the current Loan Charge exposure and apply a range of adjustments set out in the legislation. These adjustments are expected to include reallocating income across the years in which it arose, applying standardised deductions for promoter fees and removing £5,000 of liability for each eligible individual. HMRC will then assess affordability when determining appropriate time-to-pay terms.

The outcome should be a settlement figure that more accurately reflects the economic substance of the income and the taxpayer’s circumstances, rather than an unadjusted application of the original Loan Charge.

What if I cannot afford to pay my Loan Charge?

The 2025 Loan Charge Review acknowledged that many taxpayers who wished to resolve their position simply could not afford the full Loan Charge under earlier terms. The government has accepted this and intends the new framework to place affordability at its centre. This means HMRC is expected to take into account income, assets and essential expenditure when setting payment terms and may agree extended payment plans where appropriate.

For those dealing with wider financial pressures or potential insolvency, careful coordination will be required to ensure that any tax settlement does not worsen their position. Understanding the interaction between tax liabilities, personal insolvency and company debt is critical to avoiding unintended consequences.

What are the risks if I do nothing?

The Loan Charge legislation remains fully in force. The settlement window is intended to provide an alternative route to resolution, not to replace or suspend HMRC’s existing powers.

• If a taxpayer chooses not to engage, HMRC may still issue assessments based on the unadjusted Loan Charge and can take recovery action.
• Depending on circumstances, this may include enforcement activity against assets, bankruptcy proceedings or HMRC winding up petitions against employers.

These powers apply particularly where taxpayers do not engage with HMRC. Interest and late payment consequences will also continue to apply under existing law. Ignoring the issue is therefore likely to lead to a less favourable and potentially more damaging outcome.

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How can Francis Wilks & Jones help?

The new settlement opportunity creates a crucial window for resolving long running disguised remuneration and contractor loan disputes. However, the process will still be complex, and the consequences of errors or omissions can be significant. Specialist advice will help identify whether the settlement applies to your case, ensure that HMRC’s calculations are correct, and support you in negotiating affordable payment terms. It may also be necessary to consider the interaction with personal insolvency, company rescue or wider enforcement issues.

Our tax disputes team, led by an ex-HMRC senior officer Andy Lynch, advises individuals, contractors, agency workers, directors, SMEs and employers on all aspects of HMRC disputes. We provide clear, structured advice aimed at delivering realistic and sustainable outcomes.