SL repayments: calculation of loan repayments: unearned income
Is unearned income always taken into account in computing Student Loan repayments?
Unearned income may be taken into account in computing loan repayments only if
- The amount of unearned income exceeds the threshold, currently £2,000
- The borrower receives an SA return
Where unearned income is £2,000 or less
- Disregard the unearned income for Student Loan purposes
Where unearned income exceeds £2,000
- Take into account the total amount of unearned income. The first £2000 is not exempt
The annual threshold applies, even if the only source of income is unearned income.
The need for an SA return
Unearned income is included only if a statutory return has been issued to the borrower.
- Do not create an SA record solely for Student Loan purposes
- Do not restrict a repayment of tax to account for Student Loan liability if, exceptionally, no return has been submitted
The following examples assume an annual threshold of £16910 and a rate of 9 per cent.
Example 1 - Unearned income less than £2,000
Unearned income £1990
Student Loan repayments £NIL because unearned income less than £2,000, and other earnings did not exceed the annual threshold
Example 2 - Unearned income more than £2,000
Unearned income £2100
Student Loan repayments £68 ((£18,100 - £17,335) x 9 per cent) because the full amount of unearned income is included