Answers · UK 2025/26
What is the disguised remuneration loan charge in the UK?
The loan charge is an Income Tax and NI charge on disguised remuneration loans made through employer-funded arrangements (typically offshore EBTs or contractor umbrella schemes) between 6 April 1999 and 5 April 2019 that remain outstanding. HMRC treats these loans as earnings. The loan charge was introduced in Finance (No.2) Act 2017 following a review of historical avoidance schemes.
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Disguised remuneration schemes were widely used in the 2000s and early 2010s, particularly by contractors and high earners. Employers (or contractors via personal service companies) routed pay through offshore trusts or Employee Benefit Trusts (EBTs), which then provided "loans" to individuals. Because loans are not earnings, no Income Tax or NI was paid. HMRC challenged these schemes and introduced the loan charge to deal with historical cases. The loan charge (Finance Act 2016, as amended by Finance (No.2) Act 2017 and subsequent changes): applies to loans made between 6 April 1999 and 5 April 2019 that remain outstanding (unpaid) as at 5 April 2019 (the "relevant date"). Scope: the outstanding loan balance is added to income for the 2018/19 tax year and taxed as employment income (Income Tax and NI). Spreading: individuals with income under £30,000 can spread the loan charge over 3 years (equal thirds in 2018/19, 2019/20, 2020/21). Exclusions: loans made before 9 December 2010 where the employer and scheme promoter disclosed fully to HMRC, and loans settled with HMRC under an approved settlement offer, are excluded. Settlement opportunity: HMRC repeatedly offered settlement terms (most recently under the 2020 settlement terms) that in some cases produce lower tax bills than the loan charge itself. Individuals should compare settlement cost versus loan charge cost carefully. The loan charge is controversial -- the Morse Review (December 2019) recommended some changes, many of which were enacted in Finance Act 2020. Current position: individuals who settled before 5 April 2019 are unaffected; those who have not settled and have outstanding loans above the exclusions should seek specialist tax advice. HMRC guidance: guidance note on the loan charge at gov.uk/guidance/disguised-remuneration-loan-charge.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.