Student Loan Repayments
For many individuals who go to University they will have heard of and be aware of the student loan. The Student Loan Company lends students the money to pay for their tuition fees and lends eligible students a sum each term for maintenance and living expenses.
For employees the student loan repayments are deducted from their wages by their employer before being paid to their bank accounts. Payslips and P60 documents will show how much has been deducted from one’s pay during a tax period. Individuals working through self-employment will not have their student loan deducted from their income before they receive it. The self-assessment tax returns have a section for the individual to note when they started their undergraduate course and if they are due to repay their student loan. The tax calculated will then include 9% on total income above the thresholds (see further on) as repayment. This amount is paid alongside self-assessment tax to HMRC, who then pass the student loan sum to the Student Loan Company. There are two different repayment plans for undergraduate courses which are based on the student’s location and when the course began; students do not select their repayment plan.
Plan 1 applies to the following: England and Wales students who began their course in the UK before the 1st September 2012, Scotland and Northern Ireland students and EU studying in England, Wales, Scotland or Northern Ireland who started their course on or after the 1st September 1998.
Plan 2 applies to England and Wales students studying in the UK, and EU students studying in England and Wales, who started their course on or after the 1st September 2012.
Each loan becomes repayable the April that the student leaves their course, or the 4th April after their undergraduate course began if they work part-time, and if the individual earns above the threshold for repayment. For plan 1, those earning over £364 a week or £1,577 a month will have the repayments deducted from their income whereas plan 2 is repayable when the individual earns £494 a week or £2,143 a month. A Plan 1 loan is written off by the Student Loan Company for England, Wales and Northern Ireland students when the individual becomes 65 years of age and they withdrew the loan on or before the 2005-2006 academic year. If they took out the loan on or after the 2006-2007 academic year the loan is written off 25 years after the first April repayments became due. For Scotland students with a Plan 1 loan, this is written off when they become 65 and took the loan out on or before the 2006-2007 academic year. For those who took the loan from the 2007-2008 academic year, the loan is written off 30 years after the first April repayment was due.
For Plan 2 loans, these are all written off 30 years after the first April the students are due to make their repayments.Tags:
Self-assessment tax return, student loans, student loan repayments, personal tax