Loan Calculation

[rexx]

I am now trying to calculate the amount I will need to pay for the loan charge.

[DealorNoDeal]

It appears the LC does incur NI. (I think it's only if you settle that there is no NI.)

Report and account for your disguised remuneration loan charge - GOV.UK

"A loan is classed as outstanding if the total sums loaned are more than the total repayments made. The charge takes the total balance of all outstanding disguised remuneration loans on 5 April 2019 and treats them as income received on that date or trade profits arising in the tax year 2018 to 2019.

This means that loans outstanding on this date will incur an Income Tax and National Insurance contributions charge as if they were earnings or profits received in the tax year 2018 to 2019."

[webberg]

I am now trying to calculate the amount I will need to pay for the loan charge.

Then according to my understanding assuming no other income the tax I need to pay if I elect payment over 3 years will be:

You can elect to pay over three years.

Then what?

You MUST still agree the liability for each year with HMRC.

If that liability (calculated by adding loans to other income in the year the money was received) exceeds the loan charge paid (spread or otherwise), then you WILL be required to pay more.

The loan charge is NOT SETTLING.

[Albert49]

LC calculation

I am now trying to calculate the amount I will need to pay for the loan charge.

Example:
If my total loans up to 5th April 2019 is 48k.
and loan amount after 5th April is 2019 25k

Then according to my understanding assuming no other income the tax I need to pay if I elect payment over 3 years will be:

2018-19 : 20% of (16k - 12k allowance)
2019-20 : 20% of (16k - 12k allowance) + (Tax and NI on 25K)
2020-21 : 20% of (16k - 12k allowance)

Is this correct that Loan amount ups to 5th April 2019 the loans will not incur NI ?

The fact that you had loans of £25K after April 2019, suggest you were still in a loan schemes, and presumeably earning some declared income or was everything received in 2019/20 by way of a loan ?
If you did earn other income in that year, that will have used some of your tax free allowance assuming you have earned more than £12.5K in each of those years, then you will pay 20% of £16K for the LC, if you apportion the tax free allowance to the LC , then you will pay 20% of £4K, + 20% of whatever your other income is.

In other words unless the Loan amount apportioned in each year is your only income, you are in danger of trying to use your tax free allowance twice in each year.

[DealorNoDeal]

In 2018-19 salary = 12k loan = 48k
In 2019-20_salary = 12k. Loan 25k.
Assuming 12k salary in 2020..

My calculation is as follows..
2018-19 - 4k tax 0 Ni.
2019-20 - 4k + (tax and ni on 25k)
2020-21 - 4k tax + 0 ni.

Is this correct.

Using this calculator, for 2018/19, you should have already paid £30 tax and £429 NI on the £12k salary through PAYE.

Tax Calculator | UK Tax Calculators

If you do the calculation for £28k salary+loan (£12k + £48k/3), you get £3,230 tax and £2,349 NI.

You'll need to pay the shortfall of £3,200 tax and £1,920 NI.