Do you know when you start repaying your student loan and how much you repay?
We offer guidance on what you should do after you leave your course.
First of all, you do not start repaying your student loan until after your course has finished or you leave your course. So, if you are working over your vacations, no repayments will be made. There is nothing to stop you making voluntary repayments, but you do not have to. We have included further guidance below on the implications of making voluntary loan repayments.
After you leave your course
Repayments may first fall due from the beginning of the tax year after you leave if your earnings are sufficient in that year. So, if you leave in June 2014, no repayments can start until 6 April 2015 (the start of the new tax year) at the earliest. The amount you are due to repay will depend on your income – and the threshold (the minimum amount you need to be earning before starting repayments) normally increases each year. For the current tax year, Plan 1 repayments fall due at the rate of 9% on earnings over £16,910. You can find further details on our website.
If you are employed, your employer will collect the loan repayments directly from your wages and send them via HM Revenue & Customs (HMRC) to the Students Loan Company. When you start your new job your employer will ask you whether or not you had a student loan. HMRC will then tell the employer when to start collecting loan repayments from you, and how much to collect based on your earnings. Once the loan is fully repaid, HMRC tells your employer to stop taking loan deductions from your wages.
If you are self-employed, when you fill in your tax return there are boxes to complete that notify HMRC that student loan repayments are due. You can either calculate these yourself or, if you file your tax return on paper before 31 October following the end of the relevant tax year (that is by 31 October 2014 for the tax year 2013/14, for example), HMRC will calculate the repayments for you. Whereas an employee repays the loan from their wages (so each time they are paid), you will usually make a single payment – due on 31 January in the year following (that is 2015 for the tax year 2013/14). What this means is that you will have to hold back enough money to pay not only your tax and National Insurance that will be due from your income, but also your student loan repayments. You can find a worked example on our website that also gives you information on payments on account and spreading the payments.
When you are almost finished repaying your student loan you should notify HMRC of this and arrange repayments directly with HMRC, this should prevent any overpayments being made. If you are employed you can contact Students Loan Company up to two years from full repayment; and if you are self-employed you can notify HMRC on your tax return, but ideally before 31 October so the correct repayments can be calculated before payment is due in January.
Should you decide to work overseas, repayments are still due, but they cannot be collected by HMRC. Instead, you need to inform the Students Loan Company that you have left the UK and they will make arrangements with you to repay the loan. If you return to the UK for more than three months, you may become liable to make repayments in the UK.
The Student Loan Company is currently working with other countries to help identify and collect any outstanding loans from people who have left the UK.
Voluntary loan repayments
You can make voluntary repayments at any time. While these will reduce the time it takes to repay your loan, they cannot be treated as being part of the amounts you are required to pay via the tax system. For example, if your employer needs to deduct £70 each month from your wages to pass on to the Student Loans Company and you voluntarily pay over £1,400 as a lump sum, your employer will still be obliged to take off £70 each month until the loan is repaid. Any voluntary loan repayments are therefore in addition to normal deductions.