HMRC explains loan charge settlement scheme: who can use it

HMRC has published guidance on GOV.UK about the loan charge settlement scheme. It covers outstanding disguised remuneration loan charge liabilities, which relate to pay delivered in the form of loans. The guidance was first published on 17 July 2026 and last updated on 8 October 2026, when a link to a document on how the scheme will be implemented was added.

Who is eligible

The scheme applies to individuals and employers with a loan charge liability that has not been paid in full. This covers Income Tax, National Insurance contributions and late payment interest that arose:

• because of the loan charge, normally in the tax year ending 5 April 2019,
• when the loan charge income, in the form of loans, was received in earlier tax years,
• because of the loan charge and was included in a settlement agreed after 1 June 2021.

HMRC will write to people it believes are eligible with a settlement offer. The letter will show the loan details, any other income used in the calculation and the amount due. HMRC does not have to make offers to people it suspects of being promoters or introducers of avoidance arrangements.

What the offer includes

The offer uses a simplified calculation of the tax and National Insurance due on the loan charge income in the year it was received, which may reduce the amount. It also includes a reduction for promoter fees and a further £5,000 deduction. The total reduction is capped at £70,000. The settlement does not include late payment interest, Inheritance Tax liabilities or most penalties applied to the original loan charge amount.

If an employer who was responsible for deducting PAYE made the payments, HMRC will first try to settle with the employer, if it still exists, and will write to the employee at the same time with an offer. Employees can accept straight away if they have £0 to pay or do not want to wait. If they wait, they do not lose the chance to settle.

Payment and decision

Anyone who disagrees with the figures in the letter should contact their caseworker, and HMRC will send a new offer if the figures change. If you cannot pay in one go, an instalment plan of up to 5 years is possible, and longer in some circumstances. Interest is charged on instalments.

To accept, you must fill in, sign and return the acceptance form by post or email. The offer then becomes a legally binding contract and ends any open HMRC compliance checks into the arrangements it covers. The form must be returned even if the amount has been reduced to £0, otherwise the original liability will have to be paid.

If you do not accept, you will need to pay the full loan charge liability. HMRC will resolve the case under its normal processes, and late payment interest will continue to be charged until it is paid in full.

What this means for you

This only affects people who took part in loan-based remuneration schemes in the past and still owe a loan charge. If you receive a letter from HMRC, you can contact your caseworker or HMRC (tel. 0300 322 9494) before deciding. Contacting HMRC does not commit you to a settlement. HMRC also points to free help, including TaxAid (for people on low incomes) and Citizens Advice, and recommends independent tax advice, particularly on the risk of Inheritance Tax.