Loan charge settlement scheme: HMRC publishes how it will calculate offers

HMRC published a policy paper on 7 September 2026 explaining how it will implement the loan charge settlement scheme: who gets a settlement offer, how long they have to accept it, and how the settlement amount is worked out.

The legal basis

The scheme follows the government’s response to the independent review of the loan charge, published at Budget 2025. It is set up by sections 25 to 27 of Finance Act 2026 and The Employment and Trading Income etc. (Loan Charge Settlement Scheme) Regulations 2026 (SI 2026/821), made 14 July 2026 and in force from 5 August 2026. HMRC says it has already started writing to eligible customers with formal offers, prioritising those who have contacted HMRC to say they want to settle.

How long customers have to accept an offer

Every settlement offer gives at least 90 days to accept it. Most customers get longer than that, because HMRC ties the deadline to when their loan charge liability becomes final:

• Customers with an open enquiry, or an appeal not yet notified to the First-tier Tribunal, can accept an offer until the earlier of their liability becoming final or their appeal being notified to the tribunal - always more than 90 days from the original offer.
• Customers whose liability is already final but unpaid, who have already notified an appeal to the tribunal, or who have already agreed a contract settlement, have exactly 90 days, after which they cannot settle under these terms.

Employers are asked to pay first

Where a UK employer was required to operate PAYE on the loan charge and still existed on 5 April 2019, HMRC will try to collect the tax and National Insurance contributions from the employer before asking the individual. Even so, HMRC sends the individual an offer at the same time as the employer, so the individual isn’t left waiting to find out their options; if the employer settles, the individual’s offer is withdrawn or reduced by the amount the employer paid. Where an employer is an individual’s own personal service company with no other employees, HMRC will instead ask the individual to settle once the company appeals to the tribunal, rather than waiting to try to collect from the company first.

How the settlement amount is calculated

HMRC’s guidance sets out five steps for an individual: work out the gross income received through the arrangements (including an estimated 15% promoter’s fee if the actual fee isn’t known); calculate a simplified additional Income Tax and National Insurance figure, using Class 4 NIC rates for everyone and ignoring Scottish rates, dividend and savings rates, marriage allowance, capital gains, student loans and the High Income Child Benefit Charge; deduct a promoter-fee allowance of up to £10,000 per tax year (10% of the first £50,000 of gross income in that year, plus 5% of the next £100,000); add the years together and deduct £5,000; then check the result against a cap.

The cap: HMRC separately calculates a “loan charge gross liability” - a simplified estimate of the Income Tax and interest that would be due for the 2018/19 tax year, with interest running only from 31 January 2020 to 30 October 2024. If the difference between that gross liability and the settlement amount from the steps above is more than £70,000, the settlement amount is instead set at the gross liability minus £70,000.

HMRC’s own worked examples illustrate the two outcomes: in one, a customer’s discount of £22,550 is below the cap, so their settlement amount is the discounted figure of £2,810; in another, a customer’s discount would have been £80,990, so the £70,000 cap applies and their settlement amount becomes £342,900.

Employers settle on the same basis, with the total for each employer being the sum of the settlement amounts of the employees covered by that employment - split between employers where an employee had loan charge arrangements through more than one.

Penalties

HMRC says it will only charge penalties in exceptional cases connected with the arrangements being settled, and penalties already charged for those arrangements will generally no longer be payable. The exception given is behavioural penalties where HMRC has evidence the inaccuracy was deliberate and concealed.

What HMRC says about contacting it

HMRC’s guidance is explicit that contacting it does not commit anyone to settling under the scheme. Customers without a caseworker can call 0300 322 9494 or email [email protected].