paying off kids student loans...

2hc9kmju

https://forums.moneysavingexpert.com/discussion/comment/81894529#Comment_81894529

Sorry, my comment is slightly wrong as I conflated Graduates who earn their income from Employment and those who earn it as not from employment.

So to summarise…

The £2,000 unearned income threshold is one that applies where the Graduate is required to submit a Self Assessment tax return. It does not apply where no Self Assessment tax return is required.

However the HMRC manual doesn't seem to account for someone who is employed, but also runs their own business (a side hustle or maybe a nacent business that they will transition to).

So the rules are clear if you are ONLY earning income from employment (collected through PAYE - though be careful of overpayments if you get a bonus or overtime that takes you over the monthly threshold, but where your annual income is below the annual threshold - you can get these overpayments back).

Or if you only earn your income not from employment - Self Assessment return likely and if required unearned income over £2,000 will be taken into account to determine the amount of debt repayment.

If you have a hybrid earned income source - some employment and some non-employment income then you should get professional advice as to exactly how it works. The HMRC manual and guidance is not clear on how to deal with this - though it appears that as a Self Assessment return may be required then the unearned income (over £2,000) is likely to attract a student debt repayment charge…

Nice that the rules are so clear and consistent :)

And apologies for the earlier oversight.

2hc9kmju

https://forums.moneysavingexpert.com/discussion/6654811/paying-off-kids-student-loans

Sorry, new to this forum and not completely au fait with how it works technically (though am learning fast).

Anyway, posted a detailed response to your query later in the forum, think on page 2, rather than a reply.

Bottom line is DON'T PANIC.

Over repayment of student debt is STILL nearly always a bad idea, unless your Graduate is earning a significant income, which means that they will repay it in full before the term expires, which is 25, 30 or 40 years, depending on which plan they're on.

If you have any further questions, then reply to my long post…

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81894536#Comment_81894536

The definition of fiscal drag is paying a higher proportion of income in tax as wages rise. Keeping the threshold the same, when wages increases, increases the amount you pay back and so is a fiscal drag. It doesn’t need the rate of tax to increase, it can be found where a higher proportion of your income is taxed at the same rate, as in this case.

2hc9kmju

Unfortunately, some of them don't actually apply the debt write-off process to limit the amount of repayments to what the Graduate's likely income will be.

A better way to assess the total amount to be repaid is to ask an AI tool the question. You need to be careful as they don't always get things right and you need to make assumptions about earnings growth and inflation (RPI rather than CPI, I believe).

But you can start the chat by asking the tool what parameters it needs to give a valid prediction.

Key things are when repayments started, what the debt balance was when repayments started, how long is left before the debt is written off, which plan you're on, how much has already been paid and your current salary.

If you have any questions, reply to this post and I'll see if I can help.

2hc9kmju

https://forums.moneysavingexpert.com/discussion/comment/81894574#Comment_81894574

Fiscal drag is the phenomenon where inflation or economic growth pushes people into higher tax brackets — or reduces the real value of tax allowances and thresholds — without any deliberate policy change, effectively increasing the government's tax take automatically.

Classically fiscal drag is used in terms of income tax, not Student Debt (which is not a tax). You would only suffer a form of fiscal drag if your earned income is below the threshold and then moves above it and would apply whether the threshold is frozen or not. It is also only considered to be fiscal drag if you are essentially working in the same role, as a promotion is likely to come witha pay rise, but that pay rise does not suffer from fiscal drag.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81894575#Comment_81894575

Be very wary of using AI for student loan questions, they often give wrong information on plan thresholds and write off rules. This is particularly the case with plan 1 loans, where the write off depends on when you first took the loan.

2hc9kmju

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

Hi fuzzy,

Actually, the £10,000 limit is not related to whether you need to lodge a self-assessment return, but about how HMRC may collect any tax due on untaxed income.

If you have investment income under £10,000, you may be able to have your tax code changed so that you pay any tax due through PAYE.

You need to register for self assessment if;

In the UK, you need to notify HMRC by 5 October following the end of the tax year in which the circumstances arose. The main situations that trigger this requirement are:

Income-related triggers

• You're self-employed as a sole trader and earned more than £1,000 (before expenses)
• You're a partner in a business partnership
• You earned more than £100,000 in the tax year
• You have untaxed income over £2,500 (e.g. from renting out property, though amounts under this may be handled through your tax code)
• You received income from savings, investments or dividends that isn't covered by your allowances
• You received foreign income

Employment/other situations

• You're a company director (unless it's a non-profit and you receive no pay)
• You or your partner received Child Benefit and either of you earned over £60,000 (the High Income Child Benefit Charge)
• You have income from abroad or are not domiciled in the UK and want to claim the remittance basis
• You're a minister of religion
• You've sold or disposed of assets and have a Capital Gains Tax liability

Claiming purposes

• You want to claim certain tax reliefs (e.g. pension contributions at higher rates, Gift Aid relief) that can't be claimed another way
• You're newly self-employed and need to register — you do this via HMRC's online registration rather than just notifying them of a return requirement

How to notify

You can register online through your Government Gateway account or by calling HMRC. Failing to notify on time can result in a penalty, though HMRC takes a "reasonable excuse" into account. If you're unsure whether your situation requires a return, it's worth checking HMRC's online self-assessment checker or speaking to an accountant.

this may change at any time and may not be a complete list (I think LLoyds of London underwriters need to register too and i think that there are other circumstances too).

So the £10,000 isn't a threshold for triggering the requirement for lodging a self assessment return, but how any tax due from investment income might be collected.

2hc9kmju

https://forums.moneysavingexpert.com/discussion/comment/81894599#Comment_81894599

Agreed, as with advice from websites. And of course, the rules are sometimes subtly and sometimes significantly different depending upon which country you are resident in/study in.

Also, due to the personal circumstances nature of student debt, what may be right for one graduate may not be right for another in very similar (but not exactly the same) circumstances.

So you need to be careful to ensure that you give the AI tool ALL the information about the rules applying to your circumstances. Many websites make very general assumptions about your circumstances and so the actual calculation using any online tool can be wildly inaccurate.

If you aren't confident you understand the rules well enough, then you need to seek advice - either from a professional or maybe from Citizens' Advice.

However, I would suggest that anyone concerned about Student Debt -

1. DON'T PANIC;
2. Do your research and due diligence; and
3. If still not confident that you understand things, seek advice about your specific circumstances.

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81894611#Comment_81894611

Anyone whose savings interest is over £10k is required to submit a self assessment.

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81894574#Comment_81894574

I agree that the freezing of student loan repayment thresholds is a form of fiscal drag (just applied to loan repayments rather than tax).

As Martin Lewis has said it is morally wrong, as the expectation was that the repayment threshold would increase with average earnings.