limited companies and paying studend loans off

[kristen330]

Hi,

I came across a company a few weeks ago that pays off employees student loans up to £5000 a year. It is a perk of the job.

I'm thinking of going into IT contracting and setting up a ltd company in the process. I was just wondering, if I use the company money to directly pay off part of my student loans, can I class that as being a legitimate company expense on account that it is a company perk, to offset it against tax?

I'm just wondering. Trying to find a tax efficient way to manage my finances.

[Louisa@AardvarkAccounting]

Your student loan is effectively personal debt. You would not be able to get your company to pay for this as a Limited company expense to offset against corporation tax.

In the same way that you can't pay for all your personal expenditure, shopping, personal mortgages, etc.

If you were to pay for your student loan through the business - this should be classified as either a salary, dividend or loan payment to yourself. The taxes on this income that you take out can the be calculated accordingly.

[TheCyclingProgrammer]

Strictly speaking YourCo could provide you with the personal benefit of paying off a chunk of your student loan each year and whilst this benefit would be deductible against the company's CT bill - like any other salary of benefit - it would be completely pointless because you would pay tax and national insurance on the value of the benefit and YourCo would also, I think, have to pay employer's NI on the benefit too.

In other words, if any employer is offering this as a "perk" to employees, in reality, it's just part of the overall remuneration package along with any salary and other benefits.

[Chart Accountancy]

Strictly speaking YourCo could provide you with the personal benefit of paying off a chunk of your student loan each year and whilst this benefit would be deductible against the company's CT bill - like any other salary of benefit - it would be completely pointless because you would pay tax and national insurance on the value of the benefit and YourCo would also, I think, have to pay employer's NI on the benefit too.

In other words, if any employer is offering this as a "perk" to employees, in reality, it's just part of the overall remuneration package along with any salary and other benefits.

Class 1A employer's NIC will be due, and yes all benefits are deductible for CT tax.

[kristen330]

Thanks everyone! Greatly appreciate the replies. Guess I'll just carry on paying off the bare minimum required. I feel for the guys who are taking out the new post 2012 loans. The government is really screwing them over. I still can't get my head around how tuition fees have tripled twice in 7 years! (from 1150 in 2005 to 3k to 9k in 2012). Not only that, the new cohorts are subject to extortionate interest rates under the new post-2012 system too!

[FrontEnder]

Thanks everyone! Greatly appreciate the replies. Guess I'll just carry on paying off the bare minimum required. I feel for the guys who are taking out the new post 2012 loans. The government is really screwing them over. I still can't get my head around how tuition fees have tripled twice in 7 years! (from 1150 in 2005 to 3k to 9k in 2012). Not only that, the new cohorts are subject to extortionate interest rates under the new post-2012 system too!

They also get written off after a set number of years. So in theory, if you're earnings remain below the threshold you can never pay a penny back and have them written off.

[pr1]

They also get written off after a set number of years. So in theory, if you're earnings remain below the threshold you can never pay a penny back and have them written off.

25 years pre 2012, 30 years post 2012

though intentionally earning under £21k for 30 years just to stick it to the man is probably not worth it lifestyle wise, IMO

[FrontEnder]

25 years pre 2012, 30 years post 2012

though intentionally earning under £21k for 30 years just to stick it to the man is probably not worth it lifestyle wise, IMO

Obviously.

It's actually at age 65 before 2006, 25 years after 2006, then 30 years after 2012.

So I guess those who started between 2006 and 2012 have a pretty good deal. I remeber an analysis on MSE that thay showed the majority of people wont pay back anywhere near the full amount. Probably only those who get into a high paid position fairly soon after leaving uni and continuing to progress.

[ladymuck]

I paid mine off via self assessment, it was no biggie. Although that did mean I was forced to overpay and then claim a refund. Every year I have to tick a box on my SAR to say no, I don't have a student loan and add a comment to remind them it was repaid in full in 2012.