Settling is more expensive that paying the 2019 loan charge
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    Quote Originally Posted by EBTContractor View Post
    In my case they have. Formally closed with nothing to pay.
    Bloody hell. Why on earth did they do that?

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    Does anyone know definitively what HMRC offered during clso? I'm reading here: open years plus interest need to be paid; but no nic or promoters fees on open years and closed years are closed - i.e. Nothing to pay. I'd that right? Badly need this info because I contacted HMRC during clso but they never got back to me.

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    Default Detailed Example

    Using tax calculator:
    UK Tax Calculator 2017 - Updated for the 2016/2017 and 2017/2018 Tax Year

    200k total loans
    50k received in each of 2005/6, 2006/7, 2007/8, 2008/9
    Assuming promoters fee 6%. Grossing up loan, gives approx 53k.
    20k salary in each year, for which PAYE has already been deducted

    50k salary in 2018/19

    Settlement now

    2005/6
    Tax on 20k = 3,000
    NICs on 20k = 1,600
    Subtotal = 4,600

    Tax on 73k = 21,100
    NICs on 73k = 3,400
    Subtotal = 24,500

    Additional tax & NICs = 24,500 - 4,600 = 19,900
    Interest @ 43% = 8,500
    Subtotal = 28,400

    2006/7
    Tax on 20k = 3,000
    NICs on 20k = 1,600
    Subtotal = 4,600

    Tax on 73k = 21,000
    NICs on 73k = 3,500
    Subtotal = 24,500

    Additional tax & NICs = 19,900
    Interest @ 35% = 7,000
    Subtotal = 26,900

    2007/8
    Tax on 20k = 3,000
    NICs on 20k = 1,600
    Subtotal = 4,600

    Tax on 73k = 20,600
    NICs on 73k = 3,600
    Subtotal = 24,200

    Additional tax & NICs = 19,600
    Interest @ 27% = 5,300
    Subtotal = 24,900

    2008/9
    Tax on 20k = 2,800
    NICs on 20k = 1,600
    Subtotal = 4,400

    Tax on 73k = 19,800
    NICs on 73k = 4,100
    Subtotal = 23,900

    Additional tax & NICs = 19,500
    Interest @ 22% = 4,300
    Subtotal = 23,800

    Total additional liability = 104,000

    2019 Loan Charge

    (Using 2016/17 allowances and bands.)

    Tax on 50k = 9,200
    NICs on 50k = 4,300
    Subtotal = 13,500

    Tax on 250k = 98,600
    NICs on 250k = 8,300
    Subtotal = 106,900

    Additional liability = 93,400
    Last edited by Loan Ranger; 8th March 2017 at 09:03.

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    Further more (using your figures and same calculator)

    Settle 07/08 - 24900
    Settle 08/09 - 23800

    Then don't bother to pull any salary in 18/19 so 106k declared (guess you could take 5k divs tax free)
    Total Tax Deducted 32,300.00
    Class 1 National Insurance Deduction 5,640.32
    Total Deducted 37,940.32

    Total: 86640.32

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    Settling later years works out better because the interest is lower.

    Approximate percentages, as of end of Feb 2017.

    Tax Year..........Accrued Interest
    2001/2.................69.3%
    2002/3.................62.8%
    2003/4.................56.6%
    2004/5.................49.2%
    2005/6.................42.6%
    2006/7.................35.2%
    2007/8.................27.3%
    2008/9.................22.4%
    2009/10...............18.4%
    2010/11...............15.4%
    2011/12...............12.4%
    2012/13................9.4%
    2013/14................6.4%

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    Quote Originally Posted by Loan Ranger View Post
    Settling later years works out better because the interest is lower.
    Yup, hence my example settling the last two years and declaring the earlier two on 18/19.

    Interesting times...

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    Quote Originally Posted by Dylan View Post
    Yup, hence my example settling the last two years and declaring the earlier two on 18/19.

    Interesting times...
    Whacking a lump sum into a pension in 2018/19 would also offset it.

    All of this assumes you've got the money to pay them, of course, which many won't have.
    Last edited by Loan Ranger; 8th March 2017 at 09:46.

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    Or repay the 200k loan to the scheme provider in full. They then pay you a pension contribution of 200k.

    No loan charge applies.

    You have your 200k back, albeit in your pension. Of which 25% can be taken tax free if you are aged 55 or over.

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    Quote Originally Posted by Whysoserious View Post
    Or repay the 200k loan to the scheme provider in full. They then pay you a pension contribution of 200k.

    No loan charge applies.

    You have your 200k back, albeit in your pension. Of which 25% can be taken tax free if you are aged 55 or over.
    You can only put 40K per year into a pension though - rest is taxable at marginal rate. So you'd part with the 200K - and then get another tax bill for the tax on the other 160K

    However, you can carry forward some unused years.

    The numbers might add up for some though.

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    Quote Originally Posted by Whysoserious View Post
    Or repay the 200k loan to the scheme provider in full. They then pay you a pension contribution of 200k.

    No loan charge applies.

    You have your 200k back, albeit in your pension. Of which 25% can be taken tax free if you are aged 55 or over.
    Assuming the scheme provider is still around and, more importantly, you trust them with your money...

    ...the loan charge includes anti-avoidance provisions to prevent the borrower benefiting from any money repaid.

    Only genuine repayments are treated as reducing the outstanding loan balance.

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