Why you could be paying too much tax on your student loan | Work & careers

Why you might be paying an excessive amount of tax in your student loan | Work & careers

Ah, go on, go on: Mrs Doyle encourages you to fill in your tax return on time, probably whereas consuming a pleasant cup of tea.

If you could have taken out a student loan since 1998, you might be paying an excessive amount of tax. This is as a result of there could also be teething issues in terms of repaying your loan, in keeping with Newcastle-based accountancy agency Dean Statham.

Income-contingent loans began in August 1998; repayments to the loan do not begin till the April after you graduate. And you will not have to start out repayments except you might be incomes greater than £10,000 a yr. You can pay again 9% of the a part of your earnings which is over the £10,000 mark. This can be taken out of your wage at supply, in the identical manner as PAYE deductions.

So how does it work?
In the February after commencement the Student Loan Company will write to you to let you understand how a lot you’ll owe them on March 31 of that yr. In April they may write to you once more with a schedule of precise month-to-month repayments that can be taken out of your wage. SLC will then instruct the Inland Revenue to start out making deductions out of your wage (assuming you might be working and incomes greater than £10,000).

How can they take cash from my wage?
When making use of for the loan, you have been required to produce your National Insurance quantity. Using this, the Inland Revenue will cost your employer the repayments, which can come out of your gross wage (wage earlier than tax). This must be proven in your payslip clearly every month.

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Richard Nadin, from Dean Statham, says: “Be vigilant. Check your payslips regularly. Make sure you are being taxed on your gross salary minus your loan deductions.”

Can I pay an excessive amount of tax?
Problems might come up if you resolve to vary jobs. When you allow an organization, you’ll be given a P45 which ought to present your future employer how a lot tax you could have paid over the previous yr.

However, “the P45 form does not show the amount of student loan repayments during the previous employment to the new employer. When the graduate is given a P60 form at the end of the [tax] year any previous payments will not show up on it,” says Richard. So your new employer might tax you in your gross wage with out reimbursement deductions.

It is necessary to verify how the loan funds have been proven in your payslip. Keep all of your payslips as proof of fee and earnings. And at all times evaluate the March 31 payslip with the P60 in April.

What occurs if I’ve been paying an excessive amount of tax?
You ought to contact the Inland Revenue right away. It retains data of all of the tax you could have paid, and can have the ability to work out how you could have been taxed (see the field beneath in your private allowance and earnings tax charges).

What if I believe my repayments are too excessive?
Repayments rely upon how a lot you earn. If your wage goes up, your repayments will go up too. Check the desk beneath left to see if you’re paying the correct amount.

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What curiosity am I charged?
The rate of interest is linked to inflation, and is labored out the identical manner because the outdated loan system. The rate of interest stands at 2.6% a yr. The curiosity begins the day you get your first loan fee. You can be despatched an announcement each September till the loan has been repaid.

How lengthy does it take to pay the loan again?
This will rely upon the quantity you borrowed and the quantity you earn. Assuming you get a job, most loans are paid off inside 5 or 10 years of leaving college.

Can I pay again greater than 9%?
Yes. Contact the SLC, which can organize larger repayments. However, when you’ve got any excellent money owed, like credit playing cards and overdrafts, be sure you repay these first – they cost extra curiosity.

What if I can not afford to make the loan repayments?
“If you have any problems with repayments, contact your employer and your local tax office,” says a spokesman from the Inland Revenue. “Ask for help. Don’t wait until it is too late. Each case will be treated individually. If someone is suffering hardship, we will try and help.”

· For extra info, go to www.slc.co.uk or www.inlandrevenue.gov.uk.

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