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    Default Settlement with HMRC and 2019 loan charge

    So between Feb 2016 and March 2017 i recieve a total of 50,000

    12,000 in salary and 38,000 in loans.

    I wish to settle all taxes and NI with HMRC before April 2019.

    (A) How much is this likely to be?

    (B) after all taxes and NI is settled, am i still susceptible to the 2019 tax charge?


    Im not getting how the 2019 tax charge works. Why would i get the charge? Is it because i have had 38,000 in loan amounts? Or am i now in the clear. If not what would be the charge on 38,000 worth of loan amount?


    Regards

  2. #2
    CDJ
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    A) assuming this was your only income, you would be taxed as if this was salary..same as normal PAYE (but without the NI).. use a tax calculator (like listentotaxman et al) to get an estimate.

    B) no - once you've settled all tax owed on the loan you are exempt from the 2019 charge.

    The purpose of the 2019 loan charge is to draw a line under loan schemes without the government having to resort to lengthy court cases and (in their view) delaying tactics. It works by treating all outstanding prescribed Trust loans (i.e. loans from identified scheme trusts) as at April 2019 as income in the 2019-2020 tax year (i.e. if you have 100k of loans for all years, your income for 2019-20 would be increased by that 100k and then taxed at standard rates - so, roughly speaking, if your normal income for that year was 50k, your adjusted taxable income for the year would be set at 150k - meaning all of the loans will be taxed at the higher income rates, whereas atleast some would have been lower rate taxed if you settled each year separately). If you have settled the taxed owed before April 2019 you are exempt.

  3. #3

    Nervous Newbie


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    Default year

    Quote Originally Posted by CDJ View Post
    A) assuming this was your only income, you would be taxed as if this was salary..same as normal PAYE (but without the NI).. use a tax calculator (like listentotaxman et al) to get an estimate.

    B) no - once you've settled all tax owed on the loan you are exempt from the 2019 charge.

    The purpose of the 2019 loan charge is to draw a line under loan schemes without the government having to resort to lengthy court cases and (in their view) delaying tactics. It works by treating all outstanding prescribed Trust loans (i.e. loans from identified scheme trusts) as at April 2019 as income in the 2019-2020 tax year (i.e. if you have 100k of loans for all years, your income for 2019-20 would be increased by that 100k and then taxed at standard rates - so, roughly speaking, if your normal income for that year was 50k, your adjusted taxable income for the year would be set at 150k - meaning all of the loans will be taxed at the higher income rates, whereas atleast some would have been lower rate taxed if you settled each year separately). If you have settled the taxed owed before April 2019 you are exempt.
    It is the 2018/19 tax year not 19/20. So loans outstanding 5 April 2019 - tax due by 31/1/20

  4. #4
    CDJ
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    Quote Originally Posted by Delendog View Post
    It is the 2018/19 tax year not 19/20. So loans outstanding 5 April 2019 - tax due by 31/1/20
    Thanks for the correct Delendog (thought it was included in the following year, not that its happy days either way)

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