Sometimes past decisions can come back to haunt you. If you were persuaded to take a loan in place of part of your pay in the past and you have not repaid it, you may now be liable to pay a new tax called the loan charge.
This charge applies if you have not settled the amount of tax, penalties and interest owed in respect of the loan scheme you used. HMRC has been writing to those taxpayers who were involved in such schemes warning that the loan charge will be due on 5 April 2019.
If you have received such a letter you need to contact HMRC to reach a settlement before 5 April 2019. You will not have to pay all the outstanding tax in one go; HMRC will automatically offer you an arrangement to spread the payments over up to seven years if your current annual income is less than £50,000.
However, HMRC will charge forward interest of 4.25% on the outstanding amount, so it will be to your benefit to pay as quickly as possible. Any income tax you have already paid on the benefit-in-kind of having a low interest or zero-interest loan should be deducted from the loan charge tax due.
We can help you negotiate a settlement with HMRC.
Would you like help and advice on this or any other issue?
Contact us straight away by telephoning 01932 564098 or email us using our ‘Contact Us’ page.
This note was published from our Spring 2019 Tax Briefing dated March 2019
Please be aware that the information above may have changed in subsequent months.
This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.