Student Loan Payments added to tax calculation

Student Loan Payments added to tax calculation

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I have a friend who is a teacher on PAYE she also owns property and I have done her tax returns to reflect her PAYE income and rental income, on the calculation the student loan repayments get added on to the calculation and taxed, is this double taxing or do student loan payments not get taxed under PAYE ?

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By Tim Vane
22nd Mar 2016 13:27

It sounds like you have not completed the return correctly. Check your entries on the employment form and the student loan section and ensure you have input any loan payments deducted by the employer.

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Replying to Tax Dragon:
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By airgead
22nd Mar 2016 14:08

Yes I did that, ticked the box and put in the total Student loan repayments that were paid, the calculation does not show the total student loan repayment but a tax amount.  So after the PAYE and Rental income tax calculation  they add on a tax amount to increase the tax due.

 

Total tax due = £6970.60

Plus SL Tax  =    204.00

Total Tax due  £7,174.60

Student Loan payments entered in return = £2,176 

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By nogammonsinanundoubledgame
22nd Mar 2016 14:19

It depends on the amount of rental income

The student loan repayments collected through PAYE understandably only take into account the PAYE gross income in the calculation.  The payroll operator need not know anything about the rental income source.

The total obligation to repay student loan is based a percentage of the excess of total income over an annual limit.  That total income includes PAYE and non-PAYE sources, although there is a de minimis limit on investment income below which it is disregarded (but above which it is taken into account in full).

You would expect that most of the required repayments have been collected through PAYE, and provided that those deductions were entered in the SA return they would come off the balance due for the year in the SA calc.  But that can still leave a residue payable, if the rental income tops the disregard limit.

With kind regards

Clint Westwood

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Replying to Arthur Putey:
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By airgead
22nd Mar 2016 14:10

Student loan tax

 

Thank you it makes sense now

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By Tim Vane
22nd Mar 2016 14:11

Surely you are not relying on the software to calculate the tax and SL payments? What did you calculate the totals to be yourself?

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By DP1234
22nd Mar 2016 14:12

not tax

its student loan repayments

Would be the amount of repayments due on the rental income 

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RLI
By lionofludesch
22nd Mar 2016 14:32

Agree

Student loans aren't a tax.  They reduce what you owe on your student loan.

Pay off your loan and your "tax" disappears.

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By airgead
22nd Mar 2016 14:48

Student loan

 Thanks for all your replies, some of you are not familiar with HMRC on line tax returns, you cannot manually calculate the tax as the system automatically calculates the tax due from the information you put in.

Permalink gave a very sensible answer which I now understand - as the original PAYE income does take into account the extra rental income and what the SL repayments were and recalculates the SL repayments

Hope you're all enjoying the sunshine today...

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By free-rider
22nd Mar 2016 14:52

You do not need software to calculate liability manually - pencil and piece of paper should suffice.

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Replying to User deleted:
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By lionofludesch
22nd Mar 2016 15:19

Unclear

free-rider wrote:
You do not need software to calculate liability manually - pencil and piece of paper should suffice.

Indeed.  Computers aren't smart - someone has to tell them what to do.

However, I note that it is often unclear on the software how the repayments have been calculated.

Pencil and piece of paper, on the other hand - quite the opposite.

Once again - it's not a tax.

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Replying to User deleted:
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By airgead
22nd Mar 2016 16:42

You try using a pen and paper on the HMRC on line portal, if it works you are a magician!

 

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Replying to Matrix:
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By free-rider
22nd Mar 2016 16:55

I`m no magician – just a regular accountant

airgead wrote:

You try using a pen and paper on the HMRC on line portal, if it works you are a magician!

I think you are missing the point.
Irrespectively of what software you are using (3rd party or HMRC) the accountant still should be capable to check the calculation by hand to make sure it is correct.

The fact that software calculates the liability does not remove the need for accountants to understand how tax works and is calculated. I thought accountants are valued for their knowledge and ability to interpret data, not only for skill to input data in to software.

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By free-rider
22nd Mar 2016 15:50

Always worth checking

http://www.hmrc.gov.uk/manuals/cslmanual/cslm16035.htm

The link shows how to calculate SL repayment – quite straightforward actually (never thought of it before).

 

Always worth to do a manual calculation if the sense check rings the alarm bell.

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By The Highlander
22nd Mar 2016 16:32

Example

I see that HMRC don't like to proof read.  It states that the example will use a threshold of £16,910 but then uses the current year threshold of £17,335.

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By User deleted
22nd Mar 2016 17:40

Agreed ...

... you should work out the answer yourself offline to make sure the online amount is the same or thereabouts.

Just posted this though, is something to be wary of, even if the P60 shows student loan deductions, if they changed jobs it won't include any deductions from the earlier employment!

https://www.accountingweb.co.uk/anyanswers/question/student-loanp45

You should also by the sound of it be getting the client to ensure the student loan deductions are accurately reflected on their student loan statement.

 

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By Tim Vane
22nd Mar 2016 18:50

I think the OP assumes that the HMRC online portal uses some sort of unexplainable magic that no pen and paper can possibly replicate. I wonder if this sort of zombie compliance is why HMRC are so keen to push the digital agenda. Once everybody thinks the computer is always right and the answers are unfathomable to humans, the tax gap can be made to magically disappear.

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Replying to spilly:
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By lionofludesch
23rd Mar 2016 05:36

Probably

Tim Vane wrote:

I wonder if this sort of zombie compliance is why HMRC are so keen to push the digital agenda. Once everybody thinks the computer is always right and the answers are unfathomable to humans, the tax gap can be made to magically disappear.

Wouldn't surprise me.

The next step is the two line return.

"1. How much money is in your bank account ?

"2. Send it to us."

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Replying to Jason Croke:
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By nogammonsinanundoubledgame
23rd Mar 2016 08:12

Or ...

lionofludesch wrote:

Wouldn't surprise me.

The next step is the two line return.

"1. How much money is in your bank account ?

"2. Send it to us."

Alternatively:

"Advance notice of direct debit:  We are informed by your bank that yesterday the balance on your account was £12345.67. Please note that this has been debited to your account in settlement of your tax liability, further to our statutory direct debit authority."

With kind regards

Clint Westwood

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By free-rider
22nd Mar 2016 18:54

I remember a client of mine logging in to SLC website and getting details of SL deductions for the year off there.

Or maybe that's what I'd like the system to be.

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