It’s fast approaching tax return season here again at Intouch, so we’re focusing our attention on the things you’ll need in order to complete your return. It’s useful if you have everything to hand before you start your return as it saves going back and forth gathering information – especially if you leave it until the last minute and suddenly find that you cannot get the documents you need in time to meet the deadline.
It’s pretty well known that your accountant will need the usual copies of your previous P45, bank account interest summaries, dividend vouchers and rental property details, but one thing that often gets overlooked is the necessity to declare a student loan.
These days a student loan is usually collected in one of two ways if it is an “income contingent” loan:
- If you’re an employee it will be deducted from your salary by your Employer and paid over to HMRC along with the normal Tax and NI each month or quarter;
- If you complete a tax return the loan repayment will instead be calculated as part of that process, and you will pay it over to HMRC along with your usual tax payment by 31st January.
Whichever way the loan repayments happen, HMRC will pass the amount over to the Student Loan Company who will then (in due course) update their records.
There are issues with this process because HMRC do not know how much your loan is, they simply deduct a flat 9% of your income above £16,910. If you are toward the end of your loan this could result in you overpaying, and having to wait until the Student Loan Company process your payments to then repay any excess to you.
To avoid overpaying you should keep an eye on the balance, as you can then judge the point at which it’s better to repay it in full rather than suffer the 9% deduction from your income. You can either give the Student Loan Company a call to find out your balance, or set up an account on their website that will enable you to log in and view your loan at any time.
If you fail to declare your loan on the return then HMRC will, when they realise, open an enquiry and write to you to ask why it was omitted. You will then need to pay the amount due, but may also incur penalties and interest on top if you’re deemed to have been careless or negligent.
It’s interesting to note that income for student loan repayment purposes and for child benefit purposes includes your dividend income and salary income, whereas your income for childcare voucher purposes is based on your salary only.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.