To not understand self assessment, tax and student loan

[Notworryingdarling]

I work full time PAYE but do a tax return as have a rental property. Can anyone explain what happens with self assessment and student loan please? I completed the return initially and missed selecting that I have a student loan, and the amount owed was £255. But as I knew I had to enter student loan details I went back and corrected it, and the amount shot up to over £1000! I know there is a thing about getting taxed on student loan, due to having been taxed a lower amount initially against salary maybe? I would love to understand this properly, why it makes such a difference and get my head round whether I am been penalised here and not getting the benefit of paying SL before tax? I know I could try asking HMRC but takes so long to get through and in previous experience they rarely understand it themselves! Anyone who can help I would massively appreciate it!

I’m not too sure what you mean about being taxed on your student loan?

You have to make student loan repayments based on your total income. Your P60 should include student loan repayments made through employment - make sure those are included on the tax return to ensure it’s correct.

Thanks for the reply. Not totally sure what I mean myself 😂but noticed it before with a self assessment return. I have been making the student loan payments based on my PAYE income and the payments are on my P60 and on the tax return. For some reason, the fact I have a student loan means the extra tax I pay on self assessment based on the rental income is higher. I have a vague notion that it's due to the fact that SL is taken from salary pre-tax, so that when some additional income is declared, it means more tax is due on the earned income as well? That might be totally wrong though! And I would love to properly understand!

It sounds as if you have paid your student loan repayments on the PAYE part of your income. Student loan repayments are at 9% of income over the threshold, so you will need to pay 9% on your self employed income too. It has nothing to do with pre/post tax.

Thanks for the reply. That does make sense and I wonder. But, the amount is much higher than 9% of the additional income, and extra money towards my SL wouldn't be added to the amount I owe HMRC as tax would it? Tbh I paid my SL off in the tax year in question so it won't be an issue anymore but this is just really bugging me as feels like I'm somehow been penalised for having a student loan and doing a tax return.

Ohh I kind of get what you mean but no that’s now how it works. Student loan repayments due on additional income are included in the tax payment figure which explains the increase.

But if you have already paid off your student loan you don’t need to make the additional repayments now.. there’s nothing left to repay!

Oh really, so they will actually include the SL payments into the tax amount? I didn't think it would work like that so that's really interesting. I need to investigate this then as I definitely don't want to be paying the extra towards a loan that is now cleared!

Get an accountant to do your self assessment. I can't stress this enough!

If your return isn't too complicated, it won't cost much and the benefits are huge. A) you don't have to complete the bloody thing yourself B) you don't have to worry about getting it wrong C) they know all the ins and outs, and can be clever in ways you might overlook and which could save you money D) you can offset accounting costs against tax in their own right!

Especially important given the tax system around rental income has changed a lot in recent years.

The amount due at the end of your tax return will include student loan if your non PAYE income means you should pay some extra student loan. HMRC pay it over to the SLC.

The same way the figure would include national insurance if it was due.

If you don’t need to pay any additional student loan because you’ve paid the whole thing off, then you need to adjust that section of the return to show you don’t have a student loan any more.

If you’re not sure how to complete the section correctly, just contact HMRC and they’ll help you.