Key tax dates and deadlines for 2018/19
It is an inevitable reality that, for anyone earning a livin...
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.
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