Loan Charge: The 2026 Settlement Scheme and Debt Letters

What the loan charge is

HMRC describes loan schemes, also called disguised remuneration schemes, as arrangements used to avoid paying Income Tax. The FCA says these schemes paid people, often contractors, consultants and agency workers, through loans instead of salaries. The loan charge was announced at Budget 2016 and legislated in the Finance (No.2) Act 2017.

The charge added together the disguised remuneration loans still outstanding on 5 April 2019 and taxed them as income in the 2018 to 2019 tax year. After the review by Sir Amyas Morse, published on 20 December 2019, the charge applies only to loans taken out on or after 9 December 2010. Loans made between 9 December 2010 and 5 April 2016 are also outside the charge where the user fully disclosed the scheme on a tax return and HMRC failed to act.

The 2019 changes let people split the loan balance over three tax years and were estimated to take about 11,000 people out of the charge altogether.

Loan charge timeline

Date	Event
9 December 2010	Disguised remuneration rules announced; after the 2019 review the loan charge covers only loans from this date
Budget 2016	Loan charge announced
2017	Loan charge legislated in the Finance (No.2) Act 2017
5 April 2019	Loans still outstanding on this date taxed in the 2018 to 2019 tax year
20 December 2019	Morse review published; about 11,000 people taken out of the charge
26 November 2025	Government response to the second independent review (Budget 2025)
17 July 2026	HMRC publishes guidance on the loan charge settlement scheme
2 November 2026	FCA statement on third-party demands for repayment

Source: HM Treasury; HMRC; FCA

The 2025 review and the settlement scheme

A second independent review was led by Ray McCann, a former president of the Chartered Institute of Taxation. The government published its response alongside Budget 2025 on 26 November 2025 and did not abolish the loan charge. HM Treasury said the scheme is open to about 23,000 individuals and 4,000 employers who had not resolved their use of disguised remuneration, and to about 10,000 individuals and 1,000 employers who had not fully paid.

HM Treasury estimated the cost at about £365 million up to 2030 to 2031 and said about 30% of individuals in scope could have their liability written off entirely. The scheme is set out in sections 25 to 27 of the Finance Act 2026 and the Loan Charge Settlement Scheme Regulations 2026.

The offer uses a simplified calculation of tax and National Insurance in the year the income was received, a deduction for promoter fees and a further £5,000 deduction. The promoter fee deduction is 10% of the first £50,000 of gross income plus 5% of the next £100,000, up to £10,000 a tax year. Total discounts are capped at £70,000. Penalties are charged only in exceptional cases, such as where HMRC has evidence of deliberate inaccuracy and concealment.

Loan charge settlement scheme: the main terms

Term	Detail
Flat deduction	£5,000 off the settlement amount
Cap on discounts	Total discounts capped at £70,000
Promoter fee deduction	10% of the first £50,000 of gross income plus 5% of the next £100,000, up to £10,000 a tax year
Time to accept	At least 90 days from the offer
Paying	Instalments over up to 5 years, longer in some cases; interest applies to instalment plans
Penalties	Charged only in exceptional cases
Legal basis	Finance Act 2026, sections 25 to 27

Source: HMRC: how HMRC will implement the loan charge settlement scheme

How offers are made and accepted

HMRC writes to the people it believes are eligible for a settlement offer, starting with those who have told HMRC they want to settle. There is no registration process. The letter shows the loan details, any other income used in the calculation and the amount due on settlement. Everyone has at least 90 days from the offer to accept it. An individual and the employer receive offers at the same time where the employer was UK based and still existed on 5 April 2019, and if the employer settles, the individual's offer is replaced.

Acceptance means signing and returning a form by post or scanned by email. It creates a binding contract, even where the amount due is nil. Settlements can be paid in instalments over up to 5 years, and over longer in some cases, and interest applies to instalment plans. In HMRC's worked examples, a liability of £25,360 settles for £2,810, and a liability of £412,900 settles for £342,900 because the £70,000 cap applies.

Anyone who does not accept must pay the full loan charge liability, and HMRC pursues it through its normal processes, with late payment interest until paid. HMRC is not required to make offers to people it suspects of promoting or introducing avoidance schemes.

HMRC worked examples

Example	Loan charge liability	Settlement amount	Discount
Asim (cap does not apply)	£25,360	£2,810	£22,550
Barbara (cap applies)	£412,900	£342,900	£70,000

Source: HMRC implementation guide

Letters from third parties demanding repayment

On 2 November 2026 the FCA said some people are receiving legal letters threatening court action and asking for immediate repayment of disguised remuneration loans. The FCA said repayment is being sought after the loans were sold by the original provider to a third party. HMRC's guidance, updated on 3 June 2026, says some third parties offer a one-off payment in return for writing off the balance, and some loans have been recalled by insolvency practitioners. A request can be a letter asking for loan details, a demand for repayment or interest, or a statutory demand.

HMRC says a loan is unenforceable if the original lender did not have the appropriate FCA lending permission, and that the firm seeking repayment also needs FCA authorisation unless an exemption applies. The FCA says firms seeking payment may apply for a Validation Order, the formal permission needed before such loans can be enforced, and that its agreement is by no means guaranteed. Where a lender has not complied with the Consumer Credit Act 1974, the courts decide whether the loan can be enforced.

HMRC cites the High Court case Adams and others v FS Capital Ltd and others, in which affected individuals successfully challenged repayment requests. HMRC says the government cannot intervene in a dispute between two private parties over a loan contract.

Third-party repayment letters: the checks HMRC and the FCA set out

Check	What the guidance says
Lender authorisation	A loan is unenforceable if the original lender lacked the right FCA lending permission; the firm seeking repayment also needs FCA authorisation unless an exemption applies
Validation Order	A firm can ask the FCA for permission to enforce; the FCA says agreement is by no means guaranteed
Consumer Credit Act 1974	Where a lender has not complied, the courts decide whether the loan can be enforced
Statutory demand	Missing the deadline to respond may mean the loan becomes repayable
Effect on the loan charge	Repaying a loan after 5 April 2019 does not remove the loan charge
Pressure from collectors	The FCA says people contacted about a debt are not to be put under undue pressure, and asks for reports

Source: HMRC; FCA

What HMRC and the FCA tell people to do

The FCA tells people to think carefully before paying if unsure whether the amount is owed, and to read HMRC's guidance on the loan charge. HMRC and the FCA both point people to independent legal advice from a professional with experience of disguised remuneration and commercial law. The FCA Financial Services Register shows whether a lender or debt buyer is authorised.

HMRC says a statutory demand needs a response before its deadline, as missing it may mean the loan becomes repayable. The FCA says people contacted about a debt are not to be put under undue pressure, and asks for any such pressure to be reported to it. HMRC says repaying a scheme loan after 5 April 2019 does not remove the loan charge, and HMRC cannot refund loan charge already paid or alter an existing settlement.

HMRC's counter avoidance team can be reached on 0300 322 9494 or at Counter Avoidance HMRC, Bootle, BX9 1LW. Contacting HMRC does not commit anyone to settling.

Frequently asked questions

What is the loan charge?

The loan charge is a tax charge on disguised remuneration loans made from 9 December 2010 and still outstanding on 5 April 2019. The loans were added together and taxed as income in the 2018 to 2019 tax year.

How does the loan charge settlement scheme work?

HMRC writes to eligible people with an offer based on a simplified tax calculation, a promoter fee deduction and a further £5,000 deduction, with total discounts capped at £70,000. There are at least 90 days to accept.

Do I have to repay a scheme loan to a company that bought it?

Not always. HMRC says a loan is unenforceable if the original lender lacked the right FCA permission, and the FCA says a Validation Order needed to enforce such loans is by no means guaranteed. HMRC and the FCA point people to legal advice.

Does repaying the loan cancel the loan charge?

No. HMRC says that if a loan was repaid after 5 April 2019 the loan charge still applies, and HMRC cannot refund loan charge already paid.

How do I contact HMRC about the loan charge?

Through the caseworker named in the HMRC letter, or the counter avoidance team on 0300 322 9494 or by post to Counter Avoidance HMRC, Bootle, BX9 1LW. Contacting HMRC does not commit anyone to settling.