If you received payments in the form of loans whilst working as a contractor then the ‘Loan Charge’ legislation applies to you. HMRC introduced legislation called the ‘Loan Charge’, which will result in a tax charge on all such loans in 2018/19 for those individuals in a partnership arrangement or 2019/20 for those in an employed arrangement – where there was a 3rd party arrangement
If you take no action then any outstanding loan as at 5 April 2019 will be subject to a tax charge. The legislation treats the outstanding loan as income in the year of charge. For many this will result in the whole amount becoming chargeable at the higher rate (40%) or the additional rate (45%). In addition this may result in the loss of the Personal Allowance due to the level of taxable income. If the Loan Charge is due and not paid, interest and penalties will be applied.