What is the Loan Charge and what does it mean for you?

To learn about loan charge, you have to learn about the history and why the legislation was put in place on the 5th of April 2019.

HMRC have dubbed the issues as to why this parliament legislation was released as “Disguised Remuneration Loans” which are more commonly known as tax avoidance arrangements between companies and employers. What these arrangements do is seek to avoid paying Income Tax and National Insurance. Of course, these loans were never intended to be paid back. Therefore, they are classes as not being any different from normal loans and are taxable by law.

The loan charge legislation was brought in to tackle any disguised remuneration loans. This charge has hence been in place to apply to all loans made since the 6th of April 1999.

HMRC has said that around 85% of the over £1 billion has come from employers whilst the 15% has come from individuals so far. They are expected to raise a further £2.2 billion within the very foreseeable future.

Now that you know a little about the history of the loan charge, why it was put in place and the potential danger it can give to anyone who decides to ignore it. You can summarise that you shouldn’t attempt to go forward with any schemes that would incur its wrath. Therefore, we shall endeavour to tell you about the individuals that could fall under the liability of the loan charge.

Confused stressed contractor looking at too many credit cards full of debt

Who is affected by the dreaded loan charge?

According to the information provided by HMRC 78% of the £1 billion mentioned earlier has come from the private sector alone. Whilst the rest falls under businesses in the public sector which don’t have a percentage yet, as well as people who work as contractors and freelancers are at 0.2% that have been affected by the loan charge.

We can imagine later in the year there will be a lot more people affected by this. Perhaps, HMRC might even hit their predictions about the £3.2 billion they are expected to raise from the loan charge parliament legislation.

If you have not got into contact with HMRC earlier this year then expect the tax man to be knocking on your door any time soon. You could lose tens of thousands of pounds as it is classed as tax evasion and possibly take a visit to the supreme court if you missed the chance to pay up.

If you have already contacted hm revenue and customs and talked about payment arrangements then you should be fine if you repay the loan under these circumstances. As we did mention earlier the deadline was 5th of April 2019.

Healthcare costs and fees concept.Hand of smart doctor used a calculator for medical costs in modern hospital

Paying back the money owed

HMRC are understanding when it comes to paying back the loan charge and will agree to pay in instalments over a consistent number of periods. They will check how much you are paid on a monthly period to see what kind of payment plan they can work out for you, fortunately there is no maximum limit on how long you can begin repayment.

Usually you will have a dedicated individual who will focus entirely on your issues with the loan charge. They will help you agree to a manageable payment plan.

You won’t have to worry about selling your home or prize possessions as HMRC aren’t trying to make you absolutely destitute. If, however, you decide to try and dodge paying back the money owed in tax then you can expect the “appropriate” action to be taken by them.


All in all, pay your taxes when they are due even if you are a limited company to a contractor. A good taxpayer has nothing to worry about and you will continue to reap the benefit of being a taxpayer by not receiving letters in the post that are classed as fines from HMRC.

You’d be surprised the amount of people caught by HMRC dodging this however, if you have declared your financial setting and how much of the loan charge you can pay back you should be fine.