April 2017 newsletter

Welcome to another regular newsletter from the Tax Guide for Students (TGFS) website. The purpose of the newsletter is to highlight any topical tax issues which may affect students, apprentices and student money advisers.

In this newsletter we discuss the new 2017/18 tax year and some tax facts  it may be  helpful to know so you can understand your tax and whether you are paying too much; and how repaying your student loans works, which will differ depending if you have a Plan 1 or Plan 2 student loan. We also link to recent news articles from the Low Incomes Tax Reform Group (LITRG). 

Tax basics

The new tax year started on 6 April and with it comes a new personal allowance, which is the tax-free amount you can earn without paying tax, and new tax bands.

The new personal allowance for the 2017/18 tax year (which runs from 6 April 2017 to 5 April 2018) is £11,500. Most people who are tax resident in the UK are eligible for this personal allowance and this means you can earn taxable income of £11,500 without paying income tax. There are other allowances available such as the blind person’s allowance and the married couple’s allowance. Our tax essentials section explains more about these allowances and who is eligible for them.

If you are earning above £11,500 then you are likely to pay income tax; the amount of tax you pay will depend on the type of income you have, the amount of income and also where you live as Scotland has different tax rate bands. There is information on our website about what the different tax treatment may be if:

• you live in Scotland
• you have savings income (including dividends)
• you work as an employee

Top tip! If you are working you should check your payslip to make sure that the 2017/18 personal allowance is included as part of your tax code. Our factsheet on understanding your payslip will explain how you can do this.

The personal allowance is for income tax and does not affect National Insurance contributions (NIC) so it may be the case that you are earning less than the personal allowance and having deductions from your payslip for NIC. Our tax essentials section will help you understand how NIC deductions work.

Student loan repayments

If you graduated last summer and are earning over a certain amount then you may start repaying your student loan from this April.

How much you repay will depend on what you are earning and whether you have a Plan 1 or Plan 2 income contingent loan, the type of income you have and if you are working in the UK or abroad.

If you are unsure about whether you have a Plan 1 or Plan 2 loan then the Student Loans Company (SLC) have a tool which can help you.

If you have earned income, whether from being an employee or from self-employment, then the repayment thresholds for the new 2017/18 tax year are £17,775 for Plan 1 loans and £21,000 for Plan 2 loans. Your repayments are calculated as 9% on your earned income above these thresholds.

In addition, if you have unearned income (such as rental income or income from savings) above £2,000 then your repayments will be calculated as 9% on your total unearned income (this includes the £2,000 threshold).

If you work abroad then you should notify the SLC, and they will calculate your repayments using overseas thresholds. Our website explains this in more detail.

It is important that you understand how student loan repayments work so that you do not overpay and you can budget your net pay more accurately. The student loan section on our website explains in more detail how the repayments are calculated and when they are made.

News articles

LITRG website:

29 March – Make the most of lower National Insurance costs while they last, urge tax campaigners

30 March – Tax campaigners set out agenda for ‘fair, simple, accessible’ tax system

3 April – Low-paid employees start spring with a pay and tax health check!

10 April – Carer’s Allowance – can deductible employment expenses help you qualify?

26 April – Misleading HMRC phone number – are you due a refund?

(27-04-2017)