Does parent's tax free lump sum count as household income for their child's student maintenance?

mrsnonsmoker

Not sure this is the right forum but here goes, so I am trying to fill in the household income form to support my daughter's application for the student maintenance loan. In 2017/18 tax year (the one they use for their calculations now) I didn't earn anything at all, didn't claim benefits, but I took the maximum tax free lump sum from my pension £25k and then another £13k on top which of course was taxable.

I assumed that the tax free lump sum would not count towards the "household income" calculation, I thought it was only taxable income that you had to include, but on the phone today (HM Gov student finance helpline) they said no it'll be the entire amount.

If that's true it will take over £2k off the amount my daughter will receive. Seems wrong? Has anyone experienced this?

xylophone

maximum tax free lump sum from my pension £25k

There is a distinction between the PCLS (not taxed as income) and money drawn from the balance of the pension.

Money drawn from the balance of the pension is taxed as income.

If you are being asked for taxable income then I don't see how it can include the PCLS.

https://www.slc.co.uk/media/latest-news/parents-an-essential-guide-to-student-loans.aspx

And a PCLS would not be declared as income to HMRC.


It seems to me that you should check this again. Put your question in writing and if you are still not sure ask your MP to check?

http://media.slc.co.uk/sfe/1920/ft/sfe_pff2_form_1920_o.pdf

Dox

I'd be tempted to ring the Helpline again and see if you get someone different who knows what they're talking about. If you get the same answer, push them on the point that it is not taxable income and ask them to refer you to the relevant regulation.

Kynthia

On the GOV site it says the household income is the taxable income of the student and the income of others depending on the circumstances (parents, partners, etc).

As it says taxable income I would say it doesn't include the tax-free lump sum but includes any amounts that add to your taxable income figure.

mrsnonsmoker

I agree with you all it doesn't make any sense. I like the idea to ring the helpline again!

zagfles

mrsnonsmoker wrote: »

I agree with you all it doesn't make any sense. I like the idea to ring the helpline again!

Trouble is you might get someone equally clueless. The problem is, like with banks and benefits helplines, they often guess when they don't know, rather than say "sorry I don't know, I'll go and find out/get back to you". You'd be best to write to them, you're far more likely to get an accurate answer in writing.

Looking at the forms, I'm 99.9% certain that taking a TFLS from a personal pension will not count as income for student loan assessment. See http://media.slc.co.uk/sfe/1920/ft/sfe_pff2_form_1920_o.pdf which in section 3 Q1 does not ask for lump sums from personal or occupation pensions (which aren't taxable) but does ask for lump sums from the state pension (because that is taxable).

michaels

OP, if you do get a definitive answer, would b every grateful if you came back and updated this thread. Thanks

mrsnonsmoker

I will come back and let you know the outcome, I rang again, someone equally clueless said don't put the lump sum in as the poster above suggested they would!! I've sent it in now result Monday they reckon. Thanks all

System

mrsnonsmoker wrote: »

Not sure this is the right forum but here goes, so I am trying to fill in the household income form to support my daughter's application for the student maintenance loan. In 2017/18 tax year (the one they use for their calculations now) I didn't earn anything at all, didn't claim benefits, but I took the maximum tax free lump sum from my pension £25k and then another £13k on top which of course was taxable.

I assumed that the tax free lump sum would not count towards the "household income" calculation, I thought it was only taxable income that you had to include, but on the phone today (HM Gov student finance helpline) they said no it'll be the entire amount.

If that's true it will take over £2k off the amount my daughter will receive. Seems wrong? Has anyone experienced this?

Looking at other quotes from SFE they do not seem to be giving accurate or impartial advice in a number of areas, see

Guardian Article - Student loans: parents being 'misled' on application forms

To be sure of what needs to be included where refer to SFE's own guidance "Paper tax return guide" which can be found at the government website and following the link to Student Finance Forms. (Sorry MSE will not let me post a direct link)

My reading of all of this is that for pensions the Pension Commencement Lump Sums (PCLS) should not be included as it is also not included on your self assessment tax return.

FatherAbraham

mrsnonsmoker wrote: »

Not sure this is the right forum but here goes, so I am trying to fill in the household income form to support my daughter's application for the student maintenance loan. In 2017/18 tax year (the one they use for their calculations now) I didn't earn anything at all, didn't claim benefits, but I took the maximum tax free lump sum from my pension £25k and then another £13k on top which of course was taxable.

I assumed that the tax free lump sum would not count towards the "household income" calculation, I thought it was only taxable income that you had to include, but on the phone today (HM Gov student finance helpline) they said no it'll be the entire amount.

If that's true it will take over £2k off the amount my daughter will receive. Seems wrong? Has anyone experienced this?

The pension-commencement lump sum appears to be capital, not income.

HappyHarry

The PCLS is not taxable income. It does not appear on payslips, does not appear on a p60, and does not need to be mentioned in a tax return.

The SFE application form does NOT require details of non-taxable income such as the PCLS.


Take a look at section 12 on the guidance notes here: https://www.gov.uk/student-finance-forms/y/english-student-full-time/apply-for-student-loans-and-grants/2019-to-2020/no