Student Loan Repayment & Pension income

hatnezmaturestudent

Hi, I have query about private pension income being considered as "Income" for calculating student loan payments?

I understood, it was NOT because under regulations 41 and 45(1) of the Education (Student Support)(Repayment) Regulations 2009 (as amended), student loan deductions are taken from any income subject to (secondary) Class 1 National Insurance Contributions (commonly known as “NICable income”).  My private Pension is not subject to "NICable income".  I only pay tax on it.   

However, it seems to be on HMRC Self assessment Tax Return online??? 

I'm not self-employed.  To date, I've been paying student loan repayments through PAYE of part-time job. 

This year, I've had to do self assessment for the first time due to share of rental income from buy-to-let property.  As such my tax bill (includes student loan repayment) is significantly higher than usual because HMRC self assessment online system takes into account pension income.  Is this correct?  It seems unfair!

Would appreciate any thoughts as considering complaining to HMRC. 

Thanks

Dazed_and_C0nfused

Can you confirm which section of the Self Assessment return you included the pension contributions in?

And what type of student loan it is, type 1, 2, 4 or postgraduate?

hatnezmaturestudent

Hi, I completed "Pensions (other than State Pension)" section of "UK Pensions annuities and other state benefits".  I'm on type 2 student loan.  Thank you and sorry for late reply.

sheramber

Employees who are asked to make self-assessment returns by HMRC If you’re an employee who also gets a tax return under the self-assessment (SA) system, you may have to make some loan repayments with the return, as well as those taken by your employer. The total amount of student loan you have to repay for the year will be based on your total income for the year – that is, all your PAYE income plus any extra self-employed income and any unearned income (if it’s above £2,000 a year). You can get credit in your tax return for any student loan amounts your employer has already taken during the year so you don’t repay too much. Like PAYE, the SA system will work out your loan repayments based on your income above the threshold, at a rate of 9%. Any SA payment will be due on 31 January following the tax year of your assessment. You can find information on how to fill i Employees n your SA return in the guidance and booklets provided by HMRC. If you pay UK tax and you get a self-assessment tax return, you should use this to declare student loan repayments. You must fill this form in correctly and return it on time. You must also pay your tax and student loan repayment on time. If you don’t do this, you may have to pay interest and financial penalties. This is because student loans will be treated in the same way as tax for the purposes of self assessment. Please note that if you’re self-assessed, your occupational pension will also be subject to your overall loan repayments.

page 9 of 

A guide to terms and conditions - GOV.UK

hatnezmaturestudent

Thanks.  Looks like completing SA increases student loan liabilities that if it was on PAYE!  Clearly unfair.

hatnezmaturestudent

sheramber said:

 Please note that if you’re self-assessed, your occupational pension will also be subject to your overall loan repayments.

page 9 of 

A guide to terms and conditions - GOV.UK

Just noted above sentence relates to T&Cs  for loans after August 2021.  Mine started before.  T&Cs for loans before, does not have above sentence on Page 9.  Neither does it cover pension income on completion of SA on page 10.

A Guide to Terms and Conditions (publishing.service.gov.uk)

sheramber

page 9
The total amount of student loan you have to repay for the year will be based on your total income for the year – that is, all your PAYE income plus any extra self-employed income and any unearned income (if it’s above £2,000 a year). 

Pension counts as unearned income


https://www.whatdotheyknow.com/request/pension_income_included_in_incom

oldfoodiegal

Hi hatnezmaturestudent, I'm very late on this thread as I've just joined the MSE forum to ask a very similar question to yours.... I was a mature student, recently graduated and considering taking my 25% TFLS pension in the next few months. I've done a small amount of consultancy work (way under the £12500 tax threshold) so will have to complete SA... What was your outcome please?

I'm wondering whether to defer taking my 25% and knocking the bit of consultancy work on the head... doesn't seem worth it if my lump sum is then treated like income and a few thousand is taken out of it for Student loan repayments.... as you've mentioned, this wouldn't be the case if I were PAYE.....

Dazed_and_C0nfused

oldfoodiegal said:

Hi hatnezmaturestudent, I'm very late on this thread as I've just joined the MSE forum to ask a very similar question to yours.... I was a mature student, recently graduated and considering taking my 25% TFLS pension in the next few months. I've done a small amount of consultancy work (way under the £12500 tax threshold) so will have to complete SA... What was your outcome please?

I'm wondering whether to defer taking my 25% and knocking the bit of consultancy work on the head... doesn't seem worth it if my lump sum is then treated like income and a few thousand is taken out of it for Student loan repayments.... as you've mentioned, this wouldn't be the case if I were PAYE.....

Appreciate you won't believe this but a tax free lump sum isn't included on a Self Assessment return and therefore cannot add to any student loan repayments that are needed.

A TFLS is not pension income for tax purposes.

oldfoodiegal

Dazed_and_C0nfused said:

oldfoodiegal said:

Hi hatnezmaturestudent, I'm very late on this thread as I've just joined the MSE forum to ask a very similar question to yours.... I was a mature student, recently graduated and considering taking my 25% TFLS pension in the next few months. I've done a small amount of consultancy work (way under the £12500 tax threshold) so will have to complete SA... What was your outcome please?

I'm wondering whether to defer taking my 25% and knocking the bit of consultancy work on the head... doesn't seem worth it if my lump sum is then treated like income and a few thousand is taken out of it for Student loan repayments.... as you've mentioned, this wouldn't be the case if I were PAYE.....

Appreciate you won't believe this but a tax free lump sum isn't included on a Self Assessment return and therefore cannot add to any student loan repayments that are needed.

A TFLS is not pension income for tax purposes.

Hello dazed and confused... I do believe you about the TFLS not being included on the tax return... I think I'm getting caught up on posts where people in a similar position to me are declaring £2000+ of unearned income ( from interest/ small online business etc  for example) and then this seems to drag in other unearned income into the student loan repayment calculation..including (some examples say ) pension payments.... possibly not from the lump sum though and maybe from regular pension payments - the examples are always clear enough. 

So its not the pension being taxed, its the combination of the £2000+ unearned income and completing SA that starts the repayment ball rolling if other unearned income is present...

But as you've mentioned, you don't need to declare the TFLS on a SA tax return so maybe I'm going around in circles with myself.

I'm nowhere near the earnings for repayment threshold p/a so I'm hoping this alone is enough to not trigger payments.... 

Frustratingly this wouldn't be a factor if I were PAYE.... 

There are some similar posts on here saying it's hard to get a definitive answer on this from both SFE and HMRC.... some accountancy /tax advisor sites do talk about pensions as being unearned income but dont specifiy whether its the lump sum part or not......

I do very much appreciate your input and thanks for all the answers so far.

Dazed_and_C0nfused

oldfoodiegal said:

Dazed_and_C0nfused said:

oldfoodiegal said:

Hi hatnezmaturestudent, I'm very late on this thread as I've just joined the MSE forum to ask a very similar question to yours.... I was a mature student, recently graduated and considering taking my 25% TFLS pension in the next few months. I've done a small amount of consultancy work (way under the £12500 tax threshold) so will have to complete SA... What was your outcome please?

I'm wondering whether to defer taking my 25% and knocking the bit of consultancy work on the head... doesn't seem worth it if my lump sum is then treated like income and a few thousand is taken out of it for Student loan repayments.... as you've mentioned, this wouldn't be the case if I were PAYE.....

Appreciate you won't believe this but a tax free lump sum isn't included on a Self Assessment return and therefore cannot add to any student loan repayments that are needed.

A TFLS is not pension income for tax purposes.

Hello dazed and confused... I do believe you about the TFLS not being included on the tax return... I think I'm getting caught up on posts where people in a similar position to me are declaring £2000+ of unearned income ( from interest/ small online business etc  for example) and then this seems to drag in other unearned income into the student loan repayment calculation..including (some examples say ) pension payments.... possibly not from the lump sum though and maybe from regular pension payments - the examples are always clear enough. 

So its not the pension being taxed, its the combination of the £2000+ unearned income and completing SA that starts the repayment ball rolling if other unearned income is present...

But as you've mentioned, you don't need to declare the TFLS on a SA tax return so maybe I'm going around in circles with myself.

I'm nowhere near the earnings for repayment threshold p/a so I'm hoping this alone is enough to not trigger payments.... 

Frustratingly this wouldn't be a factor if I were PAYE.... 

There are some similar posts on here saying it's hard to get a definitive answer on this from both SFE and HMRC.... some accountancy /tax advisor sites do talk about pensions as being unearned income but dont specifiy whether its the lump sum part or not......

I do very much appreciate your input and thanks for all the answers so far.

To be honest I would say that is because they assume that people realise a pension TFLS is exactly what it says on the tin.