The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
By Lynne Gowers on 15th June 2016
Ah, those were the days. Lectures and cramming for exams in the library all day and still having the energy for a pub crawl before crawling to bed in the wee hours before waking up with a banging head (and a random traffic cone beside you – how did that get there?), only to do it all over again.
It’s easy to get nostalgic about student life but now you are out in the big bad world of contracting and it’s time to pay the piper in terms of student loans.
HMRC is responsible for collecting repayments of Income Contingent Repayment (ICR) student loans where the borrower is within the UK tax system and no longer in higher education. Repayments start from the April after you finish or leave your course.
As of 6th April 2016, there are two income thresholds, known as plan 1 and plan 2.
If you are not sure what plan you are on click here.
The current plan 1 threshold is £17,495. If you earn less than this you don’t have to make any repayments. If you were employed, HMRC would divide this into £1,457 a month or £336 a week.
If your deductions are based on plan 2, the threshold is £21,000. Under PAYE, HMRC would split this into £1,750 per month or £403 per week. Student loan repayments are collected at a rate of 9% on income over these limits.
Accounting factoid: HMRC uses the same earnings figure to calculate student loan deductions as they do to calculate employers secondary Class 1 National Insurance contributions.
Start by including all of your relevant income, including self-employed profits, any employment income and any unearned income over £2,000.
In your return you will be asked to confirm your student loan status. Repayments are then worked out along with any tax and NI contributions. Self assessment student loan repayments are due to be paid by 31st January following the year of assessment, therefore they will be included in your usual balancing payment each year.
Your self assessment student loan calculation is based on all relevant income in your tax return. The calculation will take into account any deductions made during periods of employment but you may have to pay an additional amount when you come to pay your annual balancing payment under self assessment.
When they receive your tax return, HMRC will calculate your final self assessment balancing payment which is due on or before 31st January each year. They will then pass details of amounts you have repaid to the SLC who will credit your student loan account.
If you wish to, you can make additional voluntary payments towards outstanding student loans. These will always be on top of any amounts that HMRC collect through either PAYE or self-assessment.
Our guide to choosing the right accounting software walks you through the market leaders to help you choose the right platform for your business
Take a look at our recent blogs below.
If you decided to take the plunge and be your own boss, one of the first decisions you’ll need to ...
Published: 6th August 2018
If you engage Boox to do your company’s VAT returns, you’ll be aware that we require your specif...
Published: 26th July 2018
It’s not just something cows do! MOO is the acronym for Mutuality of Obligation, which exists in e...
Published: 23rd July 2018
While it’s not a new problem, it certainly isn’t one that’s going away anytime soon. We’re t...
Published: 20th July 2018
HMRC are dogged in their efforts to recoup unpaid tax through schemes that they view as tax avoidanc...
Published: 18th July 2018
It is the time of year again when HMRC are sending out Self-Assessment Statements. These show all pe...
Published: 6th July 2018
To stay on the right side of HMRC’s expenses and benefits legislation, P11Ds need to filed by 6th ...
Published: 3rd July 2018
GDPR – the General Data Protection Regulation, comes into effect on 25th May and is the bigges...
Published: 24th May 2018
As a business owner, your time is way too precious to spend hours dealing with HMRC or Companies Hou...
Published: 14th May 2018
“Never do tomorrow what you can do today. Procrastination is the thief of time” Charles Dicken...
Published: 11th May 2018
Congratulations! The very fact you clicked this far shows you are considering employing staff, and t...
Published: 17th April 2018
If you need a little help to find the right accountancy service, don’t worry.
Thousands of contractors, freelancers and locums turn to Boox for help and advice with their limited company accounting. They love our personal service and app.
Specialist accounting for sole traders and the self employed, Boox combines easy online tools with expert support to take away the stress of handling your accounts.
Our combination of market-leading accounting software and expert personal advice gives you greater financial control and more time to grow your business.