Chargeable Event Gains and Student Loans


We recently came across the interesting question of whether a client with an outstanding student loan would be required to repay part of the loan if they had incurred a chargeable event gain on an investment bond.

As a general rule, student loan repayments are based on any individual’s income for the tax year. There are two types of plan available and the individual has to make loan repayments of 9% of their income over the minimum amount of:

• £17,775 for Plan 1
• £21,000 for Plan 2

In addition, from the date of the first payment interest is also payable and depends on which plan the individual has selected.

More details on student loans can be found on the HMRC website here.

However, according to the student loans company, where an individual has savings income of more than £2,000 a year, they may have to make additional student loan repayments.
Savings income includes interest on stocks, shares or savings. And, as we know, chargeable event gains are treated as savings income and taxed as such.

The student loan company states:

‘HM Revenue & Customs will advise you if you need to make any payments directly to them in respect of student loans once they have assessed any Self Assessment tax return you submit to them.’

Note the individual has to declare any chargeable event gain via their self assessment return, regardless of whether or not there is any liability to income tax on the gain.

While there is no certainty as to whether or not HMRC will definitely ask for a repayment, it is helpful for individuals to be aware that they could be required to repay some of their student loan in these circumstances. Of course, in some cases individuals may prefer to repay part/all of the student loan as it will save them having to pay interest on the loan repayments.



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