paying off kids student loans...

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81891965#Comment_81891965

If you have income that you need to pay tax on, you need to tell hmrc. Chances are they will then tell you to complete a tax return.

https://www.gov.uk/undeclared-income

certainly if you have over £2,500 in untaxed income you are required to complete a tax return see eg https://www.litrg.org.uk/tax-nic/how-tax-collected/self-assessment-and-tax-returns/who-should-complete-tax-return.

So you are effectively asking if you have unearned income between £2 and £2,500 and can you avoid completing a tax return and therefore avoid having student loan repayments deductions on that income. In these cases you notify hmrc in writing/ by phone/ webchat. They will adjust your PAYE tax code to collect the tax or you could pay by a simple assessment. There would still be the risk going forward that they ask you to complete a self assessment.

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81892116#Comment_81892116

You shouldn't need to tell HMRC about savings interest as they will already have received that directly from the providers and you only need to register for self assessment if savings interest is over £10k. ( Could not read the second link as getting a "page not found".)

I am guessing therefore that once savings interest is over £2k (but less than £10k) and total income is above the repayment threshold, that the extra payment required as a result of savings interest is automatically taken via PAYE.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81892728#Comment_81892728

A stray full stop. Should be ok now.

If you have savings income to declare and want it collected via PAYE (assuming you have sufficient PAYE income) you need to tell hmrc. Whether they can make a deduction from PAYE for student loans I don't know; I know thy can for expected savings interest. I suspect that once you are in this category it won't be long before you get a self assessment request landing.

Ed-1

https://forums.moneysavingexpert.com/discussion/comment/81891965#Comment_81891965

A different section of the repayment regulations applies for borrowers who are in self-assessment.

Having unearned income in excess of £2,000 is not in itself sufficient to require you to file a tax return so no student loan repayments are due on this income.

If you are in self-assessment for another reason, however, student loan repayments are then calculated based on your total income for the year, plus the total of any unearned income over £2,000.

In PAYE employment alone, repayments are not calculated on total income, but rather (like NICs), income over a pay period threshold which is separate for each employment you have.

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81893023#Comment_81893023

Sorry I am still a little confused.

If you are a plan 2 loan graduate with a salary over the repayment threshold, you are taxed via PAYE and not self assessment, and you have savings interest in excess of £2k, will you have to pay 9% on your savings interest in addition to the 9% of your earned income which is over the repayment threshold? If so how is it paid?

Ed-1

https://forums.moneysavingexpert.com/discussion/comment/81893144#Comment_81893144

No as you are not in self-assessment so that section (Part 3) of the regulations does not apply to you. Only Part 4 applies.

You can read the full terms here:

https://www.legislation.gov.uk/uksi/2009/470/contents

silvercar

There is a long list of who is required to complete a tax return, you only need to qualify on one count and then you will be in the self assessment regime and therefore pay student loan repayments based on all income.

https://www.litrg.org.uk/tax-nic/how-tax-collected/self-assessment-and-tax-returns/who-should-complete-tax-return

You can use this gov tool to see if you need to complete a tax return:

https://www.gov.uk/check-if-you-need-tax-return

2hc9kmju

https://forums.moneysavingexpert.com/discussion/comment/81890715#Comment_81890715

Actually, no. Repayments are collected through the PAYE system only. They do not form part of a graduate's tax return. That is another reason why this isn't a "tax" as such, but a repayment scheme to pay towards a debt.

2hc9kmju

https://forums.moneysavingexpert.com/discussion/comment/81890489#Comment_81890489

https://forums.moneysavingexpert.com/discussion/comment/81890855#Comment_81890855

This isn't fiscal drag as such. Fiscal Drag occurs when you pay tax at a higher rate because your income has gone up in line with salaries, but the threshold at which the higher rate is applied hasn't changed. In this case, you pay more back as the excess above the threshold is greater than it would have been if the threshold had increased, but the rate at which you pay is not higher.

Interestingly, I did some analysis of the "tax-free" threshold (£12,570) going back to the 1970's and if you increased the threshold in line with earnings growth over that period, it would be less than £10,000 now…

2hc9kmju

Actually, this is a bit more complex than it first appears…

The £2,000 threshold mentioned is for graduates whose source of income is NOT from a salary - i.e. business, rental property (possibly), etc.

The manual section does not apply to a student with earned income (salary, wages). In this case the debt repayment is calculated as part of PAYE.

Where the student's income is not from salaries or wages then other rules apply and things become rather complex. These graduates are likely to have to complete a Self Assessment tax return and that is when the £2,000 unearned income may come into play.

However, it should be remembered that the onus is on the taxpayer to advise HMRC that they need to complete a Self Assessment return. Thus if you earn income other than salaries or wages, you should seek professional advice to understand the need to complete areturn and what the likely tax and debt repayment would be.

Penalties for getting this wrong can be significant.