New settlement deal offers financial relief for thousands of contractors. Here, we highlight some of the concessions
The Government has announced an overhaul of the controversial Loan Charge, offering a new and more generous settlement opportunity that could see the tax debts of thousands of affected contractors and workers significantly reduced, or even wiped out entirely.
Following the publication of the independent review into the Loan Charge, led by tax expert Ray McCann, the government has accepted the core recommendation to establish a new settlement scheme, fulfilling the objective “to help bring the matter to a close for those affected whilst ensuring fairness for all taxpayers.”
McCann stated in his Foreword statement of the Independent Loan Charge Review 2025 (November):
If “the art of taxation consists of plucking the goose so as to obtain the largest possible amount of feathers with the least possible amount of hissing”, then, by that measure, the 2017 Loan Charge has failed and become the most controversial anti-avoidance measure of our time…
My Review is specifically focused on how to bring the Loan Charge to a close for those still to settle, and their families. The indirect effect on families is easily overlooked, but it is important since whilst some 45,000 or so were directly impacted by the Loan Charge, many times that number have suffered an indirect effect, in some
cases leading to family and relationship breakdowns and employment difficulties.
What is the Loan Charge (for those who don’t know)?
The Loan Charge was enacted in 2017 with an operational date of 5 April 2019. The Loan Charge was intended to tackle historical use of contrived tax avoidance schemes that seek to avoid income tax and National Insurance by disguising remuneration as a form of non-taxable payment (typically a loan).
This legislation has been subject to significant debate and controversy due to its retrospective nature and adverse impact on taxpayers.
–KPMG
What is the new settlement?
The new framework applies to individuals and employers with outstanding liabilities under the Loan Charge, which was introduced to tackle disguised remuneration schemes (where income was paid as “loans” not intended to be repaid).
The changes are designed to make the tax bills more affordable and manageable for those who were often mis-sold the schemes.
Key features for affected contractors and workers:
| Concession | Detail |
| Tax Rate Calculation | A discount of up to £10,000 per year for he scheme was used will be applied, accounting for the historic fees paid to scheme promoters. |
| Historic Fee Discount | A discount of up to £10,000 per year the scheme was used will be applied, accounting for the historic fees paid to scheme promoters. |
| Additional Reduction | A further flat reduction of £5,000 will be applied to the new settlement amount. |
| Interest & Penalties | No late payment interest or penalties will be charged on the outstanding loan charge liability. |
| Payment Plans | You can opt to pay the new, reduced liability over five years without needing to discuss your personal financial affordability with HMRC. Longer arrangements require specific engagement. Ten years should be the maximum length of payment plan. If an individual cannot afford to pay the liability over ten years, then, as a backstop, the remainder could be suspended. Individuals on only State Pension/Universal Credit where, in a very small minority of cases, there is no reasonable prospect of recovering much of the liability due to the economic circumstances, take an exceptional approach. |
| Maximum Relief | The total reduction in liability for any single person is capped at £70,000. |
How will your debt be impacted?
The government has committed to going beyond some of the review’s recommendations to ensure the most affected individuals, particularly those on lower incomes, receive significant relief.
The financial relief is substantial, as official sources confirm:
“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.”
This means a third of affected people could resolve their tax affairs with HMRC without paying any outstanding loan charge amount.
Trevor Price, a retired IT specialist, former Home Office contractor and citizen journalist covering the Loan Charge, shared with The Freelance Informer, his take on the latest loan charge review:
Between 50% and 60% of folks caught up in this are retired or reach retirement age within the next 10 years. That’s a big problem, especially for HMRC Time to Pay.
Price highlighted there are a series of “concessions” in the report: “The Treasury has added a cap of £70,000 to the total concessions someone can have, irrespective of the size of your bill – you will only get £70k off.”
He continued,
The example they give is a ridiculously high earner, in a scheme for a short period of time – the real issue is middle earners who were in schemes for multiple years. This group is still the worst hit.
Time is not on everyone’s side
The Independent Loan Charge Review 2025 report has taken some of the factors Price mentions into account. The review report stated:
One significant problem is time. Many are approaching pension age and, as things stand, approximately 26% of the individuals HMRC includes in its estimate will be 65 or over within five years (approximately 13% already are).
This proportion, according to the Review report, “will increase to approximately 43% within the next ten years. Retirement will have a significant impact upon their ability to pay and will inevitably increase further stress and anxiety that many of these individuals currently experience over the possibility of looming pension-age poverty.”
For that reason alone, the Review suggested without significant intervention, the likelihood is that “HMRC would need to reduce its yield expectations. Indeed, delay in finding a solution will inevitably mean that HMRC’s actual yield is reduced, whilst HMRC’s costs would continue to increase.”
Having regard to the fact that some of those involved will never be able to pay the full amount required to meet the liability HMRC expects, HMRC’s actual yield is already unlikely to meet its current estimate of outstanding liability.
HMRC’s compliance costs also need to be factored in. The loan charge review report said,
Over the same ten-year period, on current estimates, HMRC will spend at least £310m if the current impasse were to continue. If HMRC were to resort to a more enforcement-focussed posture, that financial and resource cost could increase significantly when costs such as increased tribunal/court activity is factored in. These cost estimates do not include HM Treasury or Parliamentary time.
What to expect next
The new settlement opportunity will require new legislation, which is set to be introduced in the Finance Bill 2025-26.
Contractors:
Do not delay: Although the new scheme is being introduced, individuals with outstanding liabilities who have not already settled should prepare to engage with HMRC.
Seek professional advice: Given the complexity of the Loan Charge and the specifics of the new offer, you should consult an independent tax adviser or a professional body.
If eligible, you will be contacted: HMRC is expected to contact eligible taxpayers from Spring 2026 to explain how the new settlement opportunity applies to their specific circumstances.
This is intended to be the final opportunity for those yet to settle their tax affairs to reach a resolution with the tax office and draw a line under years of uncertainty. Those who have already settled their affairs are generally excluded from the new offer. However, seeking professional advice at this time may be wise.
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DISCLAIMER
This article is for information purposes only.
It is important to note the following:
- Not Financial Advice: This information is for general guidance. It does not constitute, and should not be relied upon as, specific legal, accounting, tax, or financial advice.
- Seek Professional Consultation: Given the complexity of the Loan Charge, Disguised Remuneration schemes, and the new settlement opportunity, you must seek independent professional advice tailored to your specific personal and financial circumstances. Do not take any action or refrain from taking any action based solely on the content of this article.
- HMRC is the Final Authority: The official terms, conditions, eligibility criteria, and final calculations of any settlement are determined solely by His Majesty’s Revenue and Customs (HMRC). The details of the new opportunity are subject to change until the relevant legislation (expected in the Finance Bill 2025-26) is enacted.
- No Liability: The author and publisher of this article accept no liability for any loss or damage arising from reliance on the information provided herein. You should always refer to the official government and HMRC documentation to ensure the information pertains to your individual circumstances and to gather the most up-to-date information.
unfortunately, the write off after 10 years, recommended by Ray McCann has not been accepted by the government, then adding 70K limit on reduction by the Treasury means aging victims with multiple years are potentially back to square one, with unavoidable payments
The review does not appear to do anything for the people that were bullied into settling the loan charge demands from the HMRC. It looks like it would have been better to have not settled, then waited to get a discounted offer, with no interest to pay. The interest I paid was not insignificant back when I settled. Looking at the above I would probably been entitled to £20-40k discount plus no interest charge if I hadn’t done the “right thing”
And settled early!
What happens to people who settled early, is there any recompense for monies paid back with fees/costs/interest as it looks like from my simple understanding that people who have held out may get reductions in what is to be paid back.
What about those who settled? I voluntarily settled before the loan charge came in and got whacked for penalties and interest as part of settlement. Why should I be prejudiced for having sold my assets to settle voluntarily when those who haven’t or couldn’t get amounts written off? What recourse do I have?