All You Need to Know About Student Loans and Employment Income for Self Assessment
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Tax advice
6
January 2022

All You Need to Know About Student Loans and Employment Income for Self Assessment

If you have a student loan or income from other sources, such as employment salary or rental income, this may affect what you’ll need to pay or the tax rate applied to your self-employment income. Here's what you need to know.

Aaron Beardmore
Aaron Beardmore
Product Manager at Coconut
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Student loans

The government will take a portion of your salary when you earn above a specific threshold to repay your student loan. For Self Assessment, you will need to know which plan you’re on, so that your tax calculations are correct.

If you’re unsure what student loan plans are or are keen to learn more on the topic, the government website explains everything you need to know about the types of loans and what this means for repayment here.

If you’re unsure what loan plan you’re on, this might be on the documentation you received when you first applied for student finance. Alternatively, you can use the student loan balance site to check. In order to use this service, you’ll need a customer reference number or email address, a password, and your "secret answer".

Employment income

It's important to add your PAYE employment income for the year to your tax return. This is because your salary contributes to your personal tax allowance, and affects the tax rate band that you pay on your self-employment income.

Coconut can anticipate how your PAYE employment income affects your tax rate band and personal allowance, but in order to do so, we need to know the gross pay you expect to earn from employment (the amount pre-tax and deductions).

If you only record your net PAYE income (post-tax and deductions) in your transactions, we won’t know what deductions have already been made. The best way to ensure you get the right number is to update your tax profile in Coconut with both your annual salary and months in employment.

Income Tax

You get a personal allowance each year which is tax free, then you pay 20% up to the higher rate band, then 40%. There's an additional rate of 45% for high earners too.

Tax Bands

Rate

Earnings below personal allowance (£12,570)
No income tax payable
Basic rate (£12,571- £50,270)
20%
Higher rate (£50,271 – £150,000)
40%
Additional rate (Over £150,000)
45%

Your Personal allowance also reduces by £2 for every £1 you earn over £100,000.

If you live in Scotland different income tax rates apply, these are shown below:

Tax Bands

Rate

Earnings below personal allowance (£12,570)
No income tax payable.
Starter rate (£12,571- £14,667)
19%
Basic rate (£14,668 and £25,296)
20%
Intermediate rate (£25,297 and £43,662)
21%
Higher rate (£43,663 and £150,000)
41%
Additional rate (Over £150,000)
46%

National Insurance

Class 4

These are contributions we make primarily towards state pensions, but also towards other benefits like unemployment and maternity pay. There's a smaller allowance for NI than for Income Tax.

As a sole trader, you pay "Class 4" National Insurance based on the following rates:

Profits (Per Year)

Class 4 Payable

Below £9,568
No class 4 is payable
Between £9,568 – £50,270
9%
Over £50,270
2%

Note that the main rate if you're self-employed is 9%, but if you're employed it's 12%.

Class 2

In addition to this, you also pay "Class 2" National Insurance, which is £2.95 per week, so £153 a year - you can pay this along with the rest of your tax bill at the end of the year.

Profits (Per Year)

Class 2 Payable

Below £6,515
No class 2 is payable
Above £6,515
£3.05 per week

The threshold for paying class 2 national insurance is £6,205. If you earn less than this, then you don't have to pay this. More on this on the Gov website.

Rental income

If you are a landlord and have rental income and expenses, you’ll have to pay tax on these profits. Log this information in Coconut in the fields below:

Estimated annual rental income: This is the total gross income you expect to receive from your rental properties. 

Estimated annual property expenses: This is the total you expect to pay in expenses on your rental properties.

We’ll use these figures to calculate your expected profit and add this to your tax profile. 

Find more information about income tax, national insurance and student loan rates.



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