Plan 1 loans: How does ‘unearned income’ affect repayments?
If you have to fill in a tax return and you get more than £2,000 a year in 'unearned' income, this affects how much you have to repay. 'Unearned income' includes, for example, interest from savings or profits from letting out a property.
Importantly, the £2,000 is 'all or nothing'. This means that if you get any unearned income of up to £2,000 a year, it is not taken into account at all; but as soon as you go over £2,000, the whole amount is taken into account.
Let's carry on with our example from the previous section:
Example – Katrina continued (2)
a) Katrina, who has a Plan 1 income-based student loan, also has exactly £2,000 interest from her deposit in a savings account.
→ In her self-assessment, none of this is taken into account in calculating her student loan repayments. As above, her 2018/19 loan repayment is still £285.30.
But what happens if Katrina finds she has accrued an extra £1 of interest on her current account in 2018/19?
→ In her self-assessment, the whole £2,001 of unearned income is taken into account in calculating her student loan repayments. So now she will pay an extra 9% x £2,001: £180.09
When added to the £285.30 above, this makes her total 2018/19 student loan repayment £465.39.