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Apologies if this is repetitious (I did a search but the function is awful on a phone) but I have a question for the self-employed in the room.
I’m about to make the jump to a fixed share partnership position which is self-employed. I’m fairly happy with most aspects but can’t seem to figure out student loan deductions, not how much but when to calculate income tax and NI.
Essentially, do I calculate income tax, NI and student loan contributions from my gross pay figure OR deduct student loan contributions and then calculate income tax and NI from gross pay net of student loan deductions.
I’m trying to be accurate with my set aside figures and don’t want to be caught short.
Thanks!
AIUI you calculate tax & NI gross, without deducting the loan payment.
Can’t help on the legal matters, but as someone who was self employed for a few years not long after graduating, pay it even if you don’t have to unless you have something drastically profitable to do with the saved money.
I didn’t, and turns out, compound interest is a bitch.
NI, tax and student loan are all calculated from gross pay.
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I disagree with the above though, pay the absolute minimum student loan you can. The interest is pretty low, any spare cash should go into a mortgage/savings/pension before that. Earn little enough and you'll never pay it all back and it will eventually get written off (I graduated in 2003 in the English system, mine may be different to yours.) It's costing me £300/yr-ish in repayments, if I had £15k cash sitting about I could save far more than that by paying down my mortgage and then my loan would get written off anyway
For me:
English system, 3k/y fees + full 3.5k loan which went on rent. 4 year masters.
Get yourself a reasonable but not high flying professional job, and you will just about pay it off within the 30(?) year cut off, at great expense.
My investment banking/finance friends have long since seen theirs off at minimal interest; and those who have gone to low paying (charity/overseas, or stay at home/part time parent) will never pay it off so are right to make the minimum mandated payment.
Short term gains like house deposits can change this, I’ll admit.
The interest is pretty low,
Last time I looked it was about 6%. With the banking base rates being so low, I think that's bloody awful! It's not like a commercial product that might be high to reflect a poor credit rating.
Be careful to check which student loan plan you are on and the interest before comparing with the comments above. It’s varies from ~1-6%. For people on plan 1, decisions are very different to those on plan 2.
https://www.gov.uk/repaying-your-student-loan/what-you-pay
I must have been on plan 1 as I started my degree in 2003; I didn’t pay mine for 3+ years after graduation due to studying for a PhD and I seem to remember I racked up a scary amount of interest. I thankfully was able to pay it off in the 8 years after and am grateful for being able to doing so as it doesn’t feel like I owe my education anything if I decided to do something different.
Definitely depends which rate you're on. It's an outrage that interest rates of 6% are charged on student loans given the size of the debt. Effectively it's never paid off and is just a graduate tax by another name, except administered by an organisation so shambolic and incompetent it makes Chris Grayling look like Albert Einstein.
from a PAYE perspective Tax, NI and Student loan are all taken from the same gross pay figure (less the free pay elements for each deduction
English system, 3k/y fees + full 3.5k loan which went on rent. 4 year masters.
Get yourself a reasonable but not high flying professional job, and you will just about pay it off within the 30(?) year cut off, at great expense.
That's plan 1, presumably? I think even fairly modest salaries (average full time), you'd expect to pay off well before the cut off.