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Student Loans

Do you have a student loan? Are you earning at the level where you’re making re-payments? Are you doing this via self-assessment? You are? Then be sure to seek expert advice.

(This article applies if, when you took out your student loan, you were living in England or Wales)

THE BASICS - 2 PLANS


You will have taken out your student loan either under Plan 1 or Plan 2.

Plan 1 – before September 1st 2012
Plan 2 – after this date

Crucial CUT-OFFS


When does interest start to accumulate?

From the moment the money loan hits your account.

When do repayments start?

Only when your income reaches a certain level. For a loan taken out before September 1st 2012, the level is £17,775. After that date – it’s £21,000. Whatever your income, the earliest you start re-paying your loan is from the April after which you finish your course.

How much do I re-pay?

9% of the income that’s above the threshold. So – if your threshold is £21,000 and your gross pay is £28,000, you’ll pay back 9% of £7,000, namely £630.

When will my loan be written off?

Plan 1 – If you took out your loan on or before the start of the 2005/6 academic year, then you stop paying on your 65th birthday. If your loan started after this date, then 25 years after you started re-paying.
Plan 2 – 30 years after your repayments started.


Who collects, how do they collect and when do you need expert advice?


Between them, the Student Loans Company (SLC) and HMRC collaborate to collect the re-payments – via PAYE, self-assessment or both. Repaying via PAYE is the simplest way. If your only income is through employment, as opposed to self-employment, then you’ll see from payslips that you’re automatically making your re-payments each pay-day.

But – if all or part of your earnings comes from self-employment, then things can get tricky. Here’s an example. What if you’re an owner-manager and your regular pay is below the threshold, but you top up your income with dividends? Do you escape having to re-pay your student loan from the dividends? No – there’s no escape. All your income counts.


So – if you’re re-paying a student loan and your income doesn’t only come from company employment – seek out your expert tax specialist.

Disclaimer

This legal information is not the same as legal advice and you may not rely on our post as a recommendation of any particular legal understanding. Please, consult an attorney if you’d like to get an advice on your interpretation of this article.