Navigating Student Loan Repayments and Payrolled Benefits: How K2 Accountancy Group Can Help You

Taxpayers with student loans who also receive payrolled benefits in kind (BIK) need to be particularly cautious when completing their self-assessment (SA) tax returns. The Institute of Chartered Accountants in England and Wales (ICAEW) has issued a warning to ensure that taxpayers avoid being overcharged on their student loan repayments. At K2 Accountancy Group, we understand the complexities of self-assessment, and we’re here to help you manage this process efficiently and accurately.

The Problem: Overcharging on Student Loan Repayments

HMRC’s self-assessment system calculates student and postgraduate loan repayments based on the total pay-as-you-earn (PAYE) income declared on the SA tax return. However, this can create complications for taxpayers whose income includes payrolled BIK, as well as certain other payments, such as termination payments, that are not subject to class 1 National Insurance Contributions (NIC).

Here’s the issue: while student loan repayments are not due on payrolled BIK or other payments that don’t fall under class 1 NIC, HMRC’s system often doesn’t distinguish between these payments and other PAYE income. This can result in HMRC inadvertently overcharging student and postgraduate loan repayments, creating an unnecessary financial burden for taxpayers.

How to Avoid Overcharges: Follow HMRC Guidance

To avoid being overcharged on your student loan repayments, it’s essential to follow HMRC’s guidance when completing your self-assessment tax return. This guidance is particularly relevant for taxpayers who meet the following criteria:

1. You are required to complete a self-assessment tax return.
2. You are liable to make student or postgraduate loan repayments.
3. Your P60 includes payrolled benefits in kind (BIK) or other earnings not subject to class 1 NIC.

HMRC first highlighted this issue in their September 2023 Agent Update, and they have since reached out to taxpayers who may have been affected. HMRC is currently working to improve its systems, but until a permanent fix is in place, taxpayers must continue to apply the workaround recommended by HMRC.

At K2 Accountancy Group, we are closely following these developments and are prepared to guide you through the process to avoid these pitfalls. We work with individuals to ensure their self-assessment returns are accurate, and we can help you apply HMRC’s workaround to avoid unnecessary charges on your student loan repayments.

How K2 Accountancy Group Can Support You

Managing student loan repayments in the context of self-assessment can be tricky, particularly for individuals with complex income streams that include payrolled BIK or termination payments. At K2 Accountancy Group, we specialise in helping our clients navigate the intricacies of tax returns, ensuring that all payments, deductions, and benefits are correctly reported.

Here’s how we can assist you:

1. Accurate Tax Reporting: We will review your PAYE income and ensure that payrolled BIK and other non-NIC liable earnings are accurately accounted for in your tax return. This reduces the risk of overcharges on your student loan repayments.
2. Applying HMRC Guidance: Our team stays up to date with HMRC’s latest guidance and ensures that it’s correctly applied to your unique situation. This includes using the necessary workaround until HMRC resolves the issue with its system.
3. Self-Assessment Expertise: We provide expert assistance with self-assessment returns, ensuring that all aspects of your income, from employment earnings to benefits in kind, are fully understood and correctly reported. We’ll help you avoid common mistakes and ensure that your return is compliant with HMRC’s requirements.
4. Avoiding Overcharges: By carefully reviewing your P60 and other relevant documents, we can ensure that your student loan repayments are calculated based on the correct income figures, avoiding costly overcharges.

HMRC’s Ongoing Fix and How It Affects You

HMRC has acknowledged that its self-assessment system cannot yet differentiate between PAYE income that is not subject to class 1 NIC and other forms of PAYE income. This issue has caused confusion and resulted in overcharges for taxpayers who are liable for student loan repayments. While HMRC works on improving its system, it’s crucial that you follow their guidance and take the necessary steps to prevent these overcharges.

At K2 Accountancy Group, we understand that managing your finances can be complex, especially when dealing with multiple income sources and benefits in kind. Until HMRC completes the necessary updates to its systems, it’s important to stay proactive and ensure that your self-assessment return is filled out correctly. Our team can help you navigate these ongoing issues with confidence, ensuring that you avoid overcharges and that your tax return is accurate.

Let K2 Accountancy Group Help You Stay Compliant

Student loan repayments, benefits in kind, and self-assessment tax returns are all areas that require careful attention to detail. By working with K2 Accountancy Group, you can rest assured that your financial matters are in expert hands. We’ll help you avoid common pitfalls, ensure compliance with HMRC’s guidance, and keep you up to date with any changes to the self-assessment system.

Whether you’re managing student loan repayments, navigating payrolled BIK, or simply need help with your self-assessment tax return, K2 Accountancy Group is here to provide expert support. Contact us today to discuss how we can assist you in staying compliant and avoiding unnecessary financial burdens.