If you were once persuaded to take a loan in place of part of your pay, you may have recently received a letter from HMRC warning that you have more tax to pay.
Where you took one or more loans from your employer or employment agency, and never repaid the amount borrowed, you are now technically liable to pay a new tax called the loan charge on 5 April 2019. This taxes all the loans received by you as income in one tax year, 2018/19, which may well push some of your income into higher rate tax bands.
The loan charge won’t be due if you agree with HMRC, before 5 April, to pay the tax due on the salary received as a loan. You won’t have to pay all the outstanding tax in one go, as HMRC will automatically offer you an arrangement to spread the payments over up to seven years where your current annual income is less than £50,000.
However, HMRC will charge 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 in respect of 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.