Capital gains tax and Student loan repayments

You do not have to make student loan repayments (SLR) on your capital gains, but if you don’t take care in how you deal with those gains then you may pay more than you need to.

If you’re self employed you currently have to submit a self-assessment tax return each year. (This will change under the Making Tax Digital proposals but we don’t yet know how the new reporting requirements will interact with SLR.) In this tax return you have to include details of your capital gains and of all your taxable savings and investment income. If your “unearned” income is greater than £2,000 then you need to pay the 9% SLR on all of it (assuming you’re over the annual threshold).

However, if you’re an employee, and don’t have to submit a tax return , then you only make SLR on your cash earnings. The requirement to make SLR on unearned income only applies if you submit a tax return.

In the past, the simplest way for an employee to report a capital gain to HMRC (and to pay the tax due) was to submit a one-off tax return. But this method should now be avoided if it opens up the employee to SLR on their unearned income.

The good news is that HMRC now offer away to report gains online, and pay the CGT,  without requiring a full return.  This facility  is called  the Report Capital Gains Tax online service (also known as the Real Time Transaction Tax return)

From 6 April 2016, basic rate income tax is no longer deducted from bank and builiding society interest, and there is no 1/9 tax credit on dividends. But everyone gets a dividend allowance of £5,000 and basic rate taxpayers get a savings allowance of £1,000 (£500 for higher rate taxpayers). The dividends and interest are still taxable (and so count for SLR purposes) but any income  within the allowance is taxed at 0%. So you can have quite substantial amounts of unearned income and still have no obligation to ask HMRC for a tax return to report it.




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