After years of uncertainty, thousands of people caught up in a complex tax dispute may soon discover they owe nothing at all. The government has announced a new settlement scheme for those facing loan charge debts, following an independent review that promises to draw a line under this long-running issue.
After years of uncertainty, thousands caught in tax disputes may discover they owe nothing under the new settlement scheme.
The loan charge affects around 45,000 individuals who used disguised remuneration schemes to avoid income tax and National Insurance contributions. These schemes involved receiving loans instead of regular pay, but the tax authorities later demanded payment with interest. Many people found themselves facing unexpected bills that felt impossibly large.
Ray McCann conducted an independent review earlier this year, and the government has accepted nearly all his recommendations while going even further in some areas. The most striking change is a £5,000 write-off for every person affected. For many taxpayers, this alone could reduce their liability to zero.
The new settlement brings several major improvements. Instead of using harsh 2019 tax rates, debts will be calculated using the lower rates from when the loans were originally made. Late payment interest, which often added around 20% to bills, will be completely written off rather than just suspended. Inheritance tax on these schemes disappears entirely.
People can also claim reductions for promoter fees they paid to set up these schemes. The discount equals 10% of the first £50,000 in loans and 5% above that amount each year, with a maximum annual reduction of £10,000. Combined with other reliefs, total reductions are capped at £70,000 per person.
Payment plans offer genuine flexibility too. While the review suggested a 10-year maximum, the government rejected this limit and will offer longer arrangements when needed. Some people living only on state pensions or universal credit will receive exceptional treatment. Each affected individual will be assigned dedicated caseworkers to guide them through the settlement process. The legislation for this settlement opportunity will be introduced in Finance Bill 2025-26.
HMRC will contact affected taxpayers starting in spring 2026 to explain their options. With 12,000 cases already resolved and 7,000 through contract settlements, this new scheme aims to provide certainty for the remaining thousands still waiting. Advanced analytics using machine learning tools could help streamline the assessment process for complex financial situations.
After years of worry, many may finally find relief.
