Loan Charge for Contractors
Expert analysis on the UK Loan Charge, Ray McCann's 2025 settlement review, and what contractors affected by disguised remuneration schemes need to know.
The Loan Charge is an anti-avoidance measure that has left tens of thousands of contractors facing life-changing demands. LCAG has documented how accountants and recruitment agencies directed people into schemes they now face the charge on, while HMRC has pursued victims of mis-selling rather than the promoters who profited. Following the Ray McCann Loan Charge Review, the new Loan Charge Settlement opportunity has been introduced via Finance Act 2026 — "unstacking" loans year-by-year, removing interest and penalties, writing off existing IHT and offering a £5,000 discount. But it isn't a blanket write-off: it requires a full and final settlement on all disguised remuneration matters, won't suit every contractor, and early signs suggest the Loan Charge recall issue is back. Below, ContractorUK brings together the full analysis — including LITRG's worked case study, the three complex taxpayer groups, and the five steps every affected contractor should be taking now — plus, with the first settlement offer letters landing from w/c 27 July 2026, the three things to check before you sign.
About the Loan Charge
What is the Loan Charge?
The Loan Charge is an anti-avoidance measure unveiled with retrospective effect at Budget 2016. It has affected thousands of contractors who were paid via loan-based remuneration schemes — often through umbrella companies — that typically replaced ordinary salary with non-taxable loans, on the understanding the loans would never need to be repaid.
Who is affected?
People most directly affected — and the group most likely to benefit from the new HMRC settlement opportunity — are contractors who:
- have outstanding Loan Charge liabilities
- were in a loan-based scheme between 9 December 2010 and 5 April 2019
- have not yet fully settled their position with HMRC.
There are also distinct concerns for three more complex taxpayer groups: contractors with a mix of pre-2010 and post-2010 disguised remuneration liabilities; recruitment agency workers paid through disguised remuneration by umbrella companies after 5 April 2019, who now sit in a "gap" between the Loan Charge and HMRC's joint and several liability rules; and contractors in arrangements that floated in and out of the Loan Charge depending on the precise scheme structure at the time.
Loan Charge: key dates
- 9 December 2010Earliest scheme date covered by the new Loan Charge Settlement opportunity.
- Budget 2016Loan Charge unveiled with retrospective effect, applying to loans outstanding from disguised remuneration schemes.
- 5 April 2019Latest scheme date covered; the Loan Charge takes effect for the 2018/19 tax year.
- 2020/21The original round of Loan Charge "loan recall" activity emerges; the main company involved was later dissolved and its director disqualified, though loans may have been sold on beforehand.
- 26 November 2025The Ray McCann Loan Charge Review is published.
- February 2026HMRC's Technical Note on the new settlement raises concerns among advisers about its likely impact on take-up.
- 2026Finance Act 2026 introduces the new Loan Charge Settlement opportunity via HMRC. Early indications suggest a fresh round of loan-recall activity is also under way.
- June–July 2026The recall issue returns in earnest, with new repayment demands issued to contractors. A ContractorUK investigation finds the paper trail proving who owns the loans today is missing.
- 15 July 2026The Loan Charge Settlement Scheme Regulations 2026 are laid before parliament.
- w/c 27 July 2026HMRC begins writing to eligible taxpayers in tranches with the first loan charge settlement offers.
- 5 August 2026The Loan Charge Settlement Scheme Regulations come into force.
The loan recall situation: where things stand
Alongside the new settlement opportunity, 2026 has brought back the loan "recall" issue — letters telling contractors their historic scheme loans are now owned by a third party and must be repaid. New demands issued in the name of West 28th Street have left some recipients "half-suicidal", and even HMRC concedes the demands hinge entirely on whether the loans are enforceable. Crucially, a ContractorUK investigation into how the alleged rights to thousands of loans passed between private companies found the paper trail proving who owns them today is missing. If you receive recall correspondence or a Statutory Demand, don't ignore it — strict time limits apply — but don't pay or sign anything without taking independent legal advice first.
Loan Charge vs the new HMRC Settlement Opportunity
How the McCann-inspired settlement, introduced in Finance Act 2026, differs from applying the original 2018/19 Loan Charge in full.
| Aspect | Original Loan Charge (2018/19) | New Settlement Opportunity (2026) |
|---|---|---|
| Calculation basis | 2018/19 Loan Charge applied in full | Calculations based on the original tax years in which the loans were received |
| Interest | Charged | Removed |
| Penalties | Possible | Removed |
| Existing IHT due | Stands | Written off |
| Discount | None | £5,000 |
| Forward interest on payment plans | Standard | Potentially helpful revamp on the cards |
| Scope of agreement | Loan Charge years | Full and final on all disguised remuneration matters |
Source: LITRG's Meredith McCammond, writing for ContractorUK.
Latest Loan Charge News & Analysis
Expert commentary on the McCann settlement, HMRC's approach, and contractor perspectives
HMRC loan charge settlement offer: 3 things to check before you sign
Settlement letters are landing. What to check before you sign — the required formalities (even for £0 offers), HMRC's simplified calculations and the £70,000 cap, and how to challenge an untaxed income estimate that could fall from £11,000 to £3,000.
30th July 2026 • InvestigationWho owns the loans? Inside the mystery of the loan charge recall scandal
ContractorUK investigates how the alleged rights to thousands of historic contractor loans passed between private companies — and why the paper trail proving who owns them today is missing.
7th July 2026 • CommentThree Loan Charge conflicts of interest show Labour ministers knew the McCann Review was compromised from the start
The 'independent' HMRC Loan Charge Review — run by a former HMRC official — is unravelling, and a clear-out of those who broke their promises must accompany the review natural justice demands.
10th June 2026 • NewsLoan charge recall issue returns, with new demands making UK contractors 'half-suicidal'
Even the sympathetic-sounding, ultimately powerless taxman knows that for contractors on the receiving end of West 28th Street's demands, it all hinges on enforceability.
6th May 2026 • AnalysisContractors, can the new HMRC loan charge settlement opportunity reduce your bill?
A worked case study from LITRG shows how the McCann-inspired settlement could play out in 2026/27 — plus the three complex taxpayer groups, the recall issue resurfacing, and the five steps to take now.
12th February 2026 • CommentBlocking the 2025 Loan Charge settlement opportunity from being a genuine opportunity is… HMRC
A new technical note shows the taxman taking with one hand and giving with the other. He must be persuaded (or instructed) to ditch his balance sheet-led approach.
27th January 2026 • CommentUnder the terms he was shackled by, Ray McCann's Loan Charge Review probably is a fair resolution
While horizontal equity concerns linger, an extraordinary solution is now in the offing for loan charge contractors.
14th January 2026 • CommentWhat the Ray McCann Loan Charge Review means for contractors
A tiny mention in the chancellor's speech belies just how large, different and personal this (final) HMRC settlement opportunity really is.
30th October 2025 • NewsWhy contractors won't accept Ray McCann's imminent loan charge review as the final word
A soon-to-be published review of settlement terms will reveal HM Treasury still deciding the fate of loan charge contractors, as even its ex-HMRC author says he won't have 'first voice.'
Five steps Loan Charge contractors should take in 2026/27
Practical guidance from LITRG for contractors weighing up the new settlement opportunity — or seeing renewed loan-recall activity.
- Don't ignore loan-recall correspondence. If you receive a letter from an organisation (or their solicitors) claiming to now own your loan, or a Statutory Demand for payment, act fast — strict time limits apply.
- Check for HMRC's caseworker letter. It should explain how the new settlement opportunity may or may not apply to your circumstances. Not received it, or think HMRC has made a mistake? Contact your usual caseworker or HMRC's helpline on 0300 322 9420.
- Already paying a Loan Charge liability? Watch for a separate HMRC letter on pausing payments so the new 'McCann' settlement terms can be applied to the maximum amount possible. Don't change or stop payments without first agreeing the pause with HMRC.
- Wait for or request a revised calculation and compare your Loan Charge liability against the settlement outcome. HMRC may need extra information from you first — start gathering bank statements and any records of how you were paid.
- Get independent advice before signing anything. TaxAid may be able to help if you're on a low income. Tailored guidance is especially important if you fall into one of the three complex taxpayer groups (pre/post-2010 mixes, the post-2019 umbrella gap, or arrangements that floated in and out of the charge).
Source: LITRG's Meredith McCammond, writing for ContractorUK.
Received an HMRC settlement offer? Check before you sign
HMRC began posting loan charge settlement offers in tranches from w/c 27 July 2026, with the Loan Charge Settlement Scheme Regulations in force from 5 August 2026. Once signed, an offer is legally binding and can only be unwound in very limited circumstances — so run through LITRG's three checks first.
- Follow the required formalities. You must formally accept the offer in writing even if it shows £0 to pay — a nil offer doesn't mean nil action. If you need to pay by instalments, HMRC must rework the offer; make sure the version you sign reflects the instalment plan and forward interest.
- Understand HMRC's simplified calculations. The regulations allow HMRC a "just and reasonable" simplified approach. Where the £70,000 cap applies, your offer is based on the simplified liability (essentially income tax plus late payment interest) less £70,000 — which, because the strict calculation could add s222 ITEPA 2003 charges, penalties and IHT, should leave most contractors better off.
- Establish the amount of untaxed income. If HMRC doesn't hold your actual figures, it may estimate them from payments made to other workers in the same scheme — and that estimate can be far too high. In LITRG's worked example, evidence about a contractor's role, rates and earnings either side of the period could cut an £11,000 estimate to nearer £3,000. Challenge promptly with payslips, contracts, timesheets or rate evidence, and keep a written record of how you reached your figures.
Source: LITRG's Meredith McCammond, writing for ContractorUK.
Loan Charge FAQs
Common questions on the Loan Charge, the McCann Review, and the new HMRC settlement opportunity — answered using ContractorUK expert commentary.
What is the Loan Charge?
The Loan Charge is an anti-avoidance measure unveiled with retrospective effect at Budget 2016. It has affected thousands of contractors who were paid via loan-based remuneration schemes — often through umbrella companies — that typically replaced ordinary salary with non-taxable loans, on the understanding the loans would never need to be repaid.
Who is affected by the Loan Charge?
Contractors who were in a loan-based scheme between 9 December 2010 and 5 April 2019 and have not yet fully settled their position with HMRC. Some contractors face additional complexity, including those with a mix of pre-2010 and post-2010 disguised remuneration liabilities, those paid through umbrella-company disguised remuneration after 5 April 2019, and those in arrangements that floated in and out of the Loan Charge depending on the precise scheme structure at the time.
What is the Ray McCann Loan Charge Review?
A review of the Loan Charge by Ray McCann, published on 26 November 2025. Following the review, legislation in Finance Act 2026 introduced a new Loan Charge Settlement opportunity via HMRC. Ahead of publication, McCann told MPs he would not have "first voice" on the outcome — Treasury and HMRC would decide.
How is the new HMRC Loan Charge settlement calculated?
The settlement allows some contractors to settle using calculations based on the original tax years in which the loans were received, rather than applying the 2018/19 Loan Charge in full. Crucial features include the removal of interest and penalties, a £5,000 discount, a write-off of any IHT already due, and payment arrangements with a potentially helpful revamp of forward interest calculations on the cards.
I have already settled with HMRC. Can I still benefit?
There may be some benefit for individuals who previously settled their position with HMRC but have not yet completed payment. The scope to benefit in this circumstance is more limited.
Is the Loan Charge recall issue back in 2026?
There are early indications of a new round of Loan Charge recall activity. This may be connected to the new settlement opportunity, with people potentially seeking deeds of release for IHT purposes to stop future liabilities accruing. The original round of recall issues was in 2020/21; the main company involved in that round was ultimately dissolved and its director disqualified, though it appears the loans may have been sold on beforehand.
Do I have to accept a £0 loan charge settlement offer?
Yes. Even where HMRC's offer shows nothing to pay, you still need to formally accept it and complete any required paperwork. Once signed, a settlement offer is legally binding and can only be unwound in very limited circumstances — so check the calculations (and, if paying by instalments, that you're signing the reworked version) before you do.
What is the £70,000 cap in HMRC's settlement offers?
Where the cap applies, your settlement offer is based on a simplified loan charge liability — essentially income tax plus late payment interest — less £70,000, rather than a strict calculation that could be increased by s222 ITEPA 2003 charges, penalties and Inheritance Tax. For most contractors, this should deliver a better financial outcome. It also means that if you don't settle under the new terms, the amount due under the loan charge may be greater than the figure in your settlement offer.
Who can I contact at HMRC about the Loan Charge?
Affected contractors should have received a letter from HMRC confirming their named caseworker. The letter should explain how the new settlement opportunity may or may not apply. If a letter has not arrived, or HMRC appears to have made a mistake, contact your usual caseworker or HMRC's helpline on 0300 322 9420.
Where can I get independent advice on the Loan Charge?
Independent advice should be sought before entering into any contract settlement. TaxAid may be able to help if you are on a low income. Tailored guidance is particularly important for contractors who fall into one of the three complex taxpayer groups identified by LITRG.