Taxpayers caught by HM Revenue & Customs’ controversial loan charge should consider entering the government’s Loan Charge Settlement Scheme, which could significantly reduce liabilities and provide more flexible repayment terms, according to tax advisers.
Fiona Fernie, partner at audit, tax and business advisory firm Blick Rothenberg, said affected taxpayers should approach HMRC even if they had not yet received a letter inviting them to settle.
“Those impacted by the loan charge should consider approaching HMRC with a view to taking part in the Loan Charge Settlement Scheme as it will significantly reduce the liabilities of many taxpayers including by capping late payment interest and charging no penalties.”
The loan charge was introduced to tackle arrangements in which individuals received remuneration through loans rather than conventional salary, with the aim of avoiding Income Tax and National Insurance.
Fernie said: “HMRC’s loan charge applies to people who had their salary paid in loans to avoid Income Tax and National Insurance. It worked by adding together all outstanding loans and taxing them as income in one year.”
“The Loan Charge Settlement Scheme can be used by those who used loan schemes but are yet to settle their liability. While HMRC will write to those that are eligible there is no need to wait for the letter, and taxpayers can contact their caseworker.”
The settlement terms include a series of measures intended to reduce the financial burden on taxpayers who remain liable.
Fernie said the scheme offered “more flexible payment terms for repayment than HMRC has previously offered”, including payment plans lasting up to 10 years in certain cases.
The terms also provide for tax to be calculated using the rates applying in the years when the income was earned, rather than treating all of the income as arising in 2018/19. Historic promoter fees can also reduce the liability by up to £10,000 for each year the scheme was used.
Every affected taxpayer will receive an automatic £5,000 deduction from their Loan Charge liability, subject to the liability not falling below zero. The settlement also provides for inheritance tax already paid because of loan schemes to be written off.
Under the July 2026 terms cited by Blick Rothenberg, HMRC will not charge late-payment interest on Loan Charge liabilities. The settlement also states that penalties will not normally be pursued unless there is clear evidence of “egregious behaviour”.
The total reduction available in relation to tax and National Insurance due on loan charge income is capped at £70,000.
Fernie said taxpayers could explore the scheme without committing themselves to settling through it.
“Approaching HMRC to discuss the options will not commit a taxpayer to using the scheme so there is nothing to lose and possibly a lot to gain.”
The scheme followed the Independent Loan Charge Review published on November 26 2025 and conducted by Ray McCann, a former HMRC official and tax adviser.
Fernie said McCann had “a deep understanding of the issues at stake and the behaviours of those who promoted the avoidance schemes”.
She added that although McCann supported ending what she described as “egregious schemes”, he had been “a constant and outspoken critic” of HMRC’s approach to securing settlements from people affected by the loan charge.
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