Government sets out revised loan charge settlement terms for 2026

According to the government’s response, the new settlement terms should mean most individuals could see reductions of at least 50% in their outstanding loan charge liabilities, and an estimated 30% of individuals could have these liabilities written off entirely.

New Settlement Offer

The new settlement terms will only be offered to those within the scope of the loan charge, and not those with enquiries into other tax avoidance, or disguised remuneration, schemes.

Whilst full details have not yet been confirmed, it appears that the headline contents of the new settlement offer will include:

• Unstacking tax years – in the settlement, rather than all income taxed as if it arose in a single year (2018/19), the income will be taxed based on the year in which the loans were made.
• HMRC will write off up to £10,000 per year of scheme use (10% of the first £50,000, 5% of next £100,000) to account for introducer fees.
• HMRC will also write off £5,000 of each individual’s liability on top of the written-off amounts above.
• The maximum reduction a single person will be entitled to will be limited to £70,000 in relation to the schemes that fall within the loan charge.
• HMRC will also not seek to apply penalties.
• HMRC have agreed to write off late payment interest up to the point of settlement - it is not clear at this stage precisely how this will be applied, and on current reading it does not appear that this is capped.
• HMRC will not collect inheritance tax as part of the settlement. This is outside of the written off capped amount of £70,000.
• Payment plans of up to 5 years agreed by default (without taxpayers having to discuss what they can afford), and up to 10 years with approval (bear in mind, forward late payment interest will be applied to these payment plans as usual including a 1% premium over the official interest rate).
• No disallowance of the Corporation Tax deduction, where the settlement is agreed at the employer level.

Note that promoters of arrangements that have left thousands of people in debt to HMRC will not qualify for any of the proposed reductions (e.g. where they have implemented schemes themselves).

Questions Still Outstanding

• It is unclear whether HMRC will seek to include S222 liabilities in the settlement.
• HMRC have still not addressed the unusual attempts to include Employer NICs in settlement proposals.
• There are a number of taxpayers with APN interest and penalties, in connection to the schemes being settled, it is unclear if these will still be collected as part of the settlement.
• No mention of what happens to court fees in relation to protected NIC balances

Next Steps

We expect HMRC to publish guidance at the start of the new year, providing further clarity to how the recommendations will be implemented in practice.

HMRC will write to all taxpayers in the scope of the new settlement in early 2026 and will write with further details beginning in Spring 2026. All taxpayers in the scope will be contacted by the end of 2027-28.

It’s worth noting that the government has confirmed taxpayers that contact HMRC will be prioritised for settlement, so we would encourage reaching out to HMRC on enquiries involving the loan charge settlement.