The Government wants to get more frequent Student Loan repayments from borrowers who have income that can’t have deductions made from it, such as from a business or other self-employment.
The proposed changes would mean these borrowers would make more regular payments during the year. They wouldn’t have to make a large end of year payment or three equal lump sum payments during the year.
One proposal would allow borrowers to provide income information during the year and Inland Revenue would use this to calculate the next repayment.
For example, self-employed borrowers or business owners would be able to have their repayments based on information they provide during the year rather than on an estimate using the previous year’s income tax return. Business owners using the new Accounting Income Method (AIM – available from 1 April 2018) would have their Student Loan repayments during the year based on the provisional income they reported for every one or two month period through their accounting software.
Borrowers who didn’t provide information during the year would have their repayments based on the previous year’s income.
In both cases, borrowers would make smaller more regular payments throughout the tax year and there would less need for a large lump-sum payment at the end of the year.
The proposed changes would reduce the likelihood of borrowers missing payments and being charged late payment interest.