The HMRC Loan Charge has been a long-standing headache for many contractors across the UK. But following the Autumn Budget 2025, there’s finally some movement (and potentially some much-needed relief!) on the horizon.
In this blog, I’ll explain what’s changed, what it might mean for you (or someone you know), and what you need to be doing now to stay ahead of HMRC’s next move.
What is the HMRC Loan Charge?
The HMRC Loan Charge was introduced to crack down on so-called “disguised remuneration” schemes. These were tax avoidance arrangements that paid people via loans instead of salary to reduce their tax bill – something HMRC ultimately decided wasn’t fair play.
But the Loan Charge’s retrospective nature meant many people suddenly found themselves facing eye-watering tax bills for actions taken years ago, sometimes under advice from seemingly reputable sources. Unsurprisingly, this caused panic, financial strain and no small amount of controversy.
So, what’s changed in the Autumn Budget?
The good news is that the government has now accepted proposals to recalculate how much tax is owed under the HMRC Loan Charge, with the aim of making bills more manageable (and in some cases, even wiping them out entirely).
This is a welcome development for thousands of taxpayers who have been caught up in the loan charge controversy.
Here’s what’s on the table:
- Historic tax rates: HMRC will now base calculations on the tax rates from the year the loan was made, not the 2019 rates previously used. This could significantly reduce what’s owed.
- Promoter fee discount: You may be eligible for £10,000 off per year for each year you used a loan scheme.
- Flat reduction: Everyone caught by the charge will get an extra £5,000 deduction.
- No interest for late payments: That alone could save some people up to 20% off their bill.
- Inheritance Tax removed: Any related IHT charges are being written off.
- Flexible payments: You’ll be able to spread your payments over five years – and without affordability checks (though interest will still apply).
- Total reduction: You could see your tax bill drop by as much as £70,000.
| If you want a broader look at what else changed in the Autumn Budget and how it affects your business, read our main Budget 2025 guide for business owners here. |
What should you do now?
HMRC plans to write to affected taxpayers in early 2026 to explain exactly what the changes mean for them. But let’s be honest, waiting on HMRC isn’t always the most stress-free strategy.
Our advice? If you think you might be impacted by the HMRC Loan Charge, it’s worth getting your paperwork in order now and speaking to someone who understands the detail (hello, that’s us). Not everyone will benefit from the changes, so it’s crucial to check where you stand. The devil is in the detail, after all!
And if you’ve already agreed a settlement with HMRC, it may still be worth revisiting the terms. There could be scope to reduce your liability even further, but the window to act might not stay open forever.
Why this matters to business owners
This move is partly about collecting tax revenue more smoothly, but it also reflects the findings of the McCann review: around 37,000 taxpayers are expected to be impacted. The big question: does it affect you?
Even if you haven’t personally used a loan scheme, someone in your network – a contractor, freelancer, or previous employee – might be affected. The Loan Charge has had far-reaching consequences, and these changes are, at the very least, an opportunity to set the record straight (and potentially save a lot of money in the process).
| If the HMRC Loan Charge changes have left you with more questions than answers, you’re not alone. But you don’t have to figure it all out yourself.Let’s have a chat and figure out where you stand, and if you could benefit from this new settlement offer. Get in touch with us at: [email protected]. |
