The Loan Charge: What the 2026 Review Means for You
The loan charge has been back in the news following the publication of the McCann Review in 2025 and the government’s response alongside the Autumn Budget. A new settlement opportunity is now on the horizon for those still caught by the legislation, and it is likely to be the final chance to resolve outstanding liabilities on more favourable terms.
In this post, we explain what the loan charge is, why it has been so contentious, and what the new settlement terms may mean if you are one of the estimated 32,000 individuals yet to resolve matters with HMRC.
What is the loan charge?
The loan charge was introduced by Finance Act 2016 as an anti-avoidance measure targeting disguised remuneration schemes. These were arrangements, commonly promoted to contractors and self-employed individuals, which structured payments in a way designed to avoid income tax and National Insurance contributions.
Broadly, the schemes worked as follows: rather than paying an individual directly, a client would pay an umbrella company. The umbrella company would pay the individual a nominal salary, with the remainder routed into an offshore trust. Funds from the trust would then be paid out to the individual as “loans” — and because loans are not income, they attracted no tax. In practice, there was never any genuine intention to repay those loans, and HMRC’s view (upheld consistently by the courts) is that the amounts were income and should always have been taxed as such.
Many individuals were actively sold these schemes by promoters who portrayed them as legitimate tax planning. In some cases, workers had no real choice but to participate if they wished to secure the contract. The loan charge was intended to recover the tax that had gone unpaid.
Why has it been so controversial?
The original legislation was widely criticised on a number of grounds.
First, its design was deliberately punitive. All outstanding “loan” amounts paid from 1999 onwards that had not been repaid by 5 April 2019 were treated as a single income receipt on that date. This meant that years’ worth of income were aggregated and taxed in a single year, pushing individuals into higher tax brackets than would ever have applied had the income been taxed annually in the ordinary way. The resulting bills were in many cases impossible to pay.
Second, the legislation was retroactive, reaching back 20 years and overriding HMRC’s usual time limits for raising assessments. This was considered fundamentally unfair, particularly for individuals who had made disclosure on their tax returns and from whom HMRC had taken no action at the time.
Third, many scheme participants were simply not aware of the risks. Promoters routinely misrepresented DOTAS registration numbers as some form of HMRC approval or endorsement — which was never the case. Reputable advisers are required under Professional Conduct in Relation to Taxation guidance to make risks clear to clients; many promoters did not.
The human cost has been severe. The Loan Charge Action Group has reported that at least 10 individuals facing the charge have taken their own lives, with many more cases of serious financial hardship, bankruptcy, and family breakdown.
How has the legislation evolved?
The first major independent review was carried out by Sir Amyas Morse in 2019. As a result of that review, the scope of the loan charge was narrowed: only loans made from December 2010 onwards were captured, and certain years dropped out of scope where an individual had made adequate disclosure on their tax return and HMRC had failed to act within the normal time limits.
Despite those changes, by 2025 it was estimated that approximately 32,000 individuals remained affected and had still not settled with HMRC. A second independent review was commissioned, this time led by Ray McCann. His findings were published alongside the Autumn Budget 2025, along with the government’s formal response.
The headline announcement was that a new and final settlement opportunity would open in Spring 2026, with more favourable terms than those previously available. The government accepted the McCann Review’s recommendations in full and, in some respects, went further. HMRC has already begun writing to affected taxpayers.
What might the new settlement terms offer?
Full details of the settlement terms are set out in draft legislation, and the opportunity is expected to open formally during 2026. While the specifics will depend on individual circumstances, the broad intent of the new terms is to:
reduce the overall tax liability for many individuals, particularly those who were misled by scheme promoters;
provide more manageable payment terms for those facing genuine financial hardship;
treat income on a year-by-year basis rather than aggregating it, avoiding the higher-rate distortion of the original charge; and
offer finality — this is intended to be a one-time opportunity to draw a line under matters.
This is likely to be the last realistic chance to resolve loan charge liabilities on any terms better than the statutory charge. Once the window closes, HMRC is expected to move to enforce the original legislation in full.
What should you do if you are affected?
If you have received correspondence from HMRC about the loan charge, or if you believe you participated in a disguised remuneration arrangement at any point, it is important to take advice as soon as possible. The settlement window is expected to be time-limited, and engaging proactively is almost always preferable to waiting.
At Alera Accounting & Advisory, we can help you understand your position, review any correspondence you have received, and guide you through the settlement process. We work with specialist tax investigation advisers where complex disputes require it, and our priority is always to achieve the best possible outcome for our clients in a way that is straightforward and stress-free.
Get in touch
If you are concerned about the loan charge or any other HMRC compliance matter, please do not hesitate to contact us. We offer an initial conversation at no charge and in complete confidence.