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Student Loans - Global taxation?

Student Loans - Global taxation?

Old Jun 7th 2017, 6:21 pm
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Default Student Loans - Global taxation?

Hey all!

I was just discussing the complexities of global taxation with my US friend. I was claiming that the UK bases tax off of residency and they claimed to refute that based on student loans. I was confused, but he linked me to this quote (from wikipedia mind...):

United Kingdom imposes global income tax on anyone who owes UK student loans. These are not true loans, but borrowings to be repaid through an additional 9% income tax, levied above a certain income threshold, until the balance of the loan expires in 30 years. The interest rate is expressed as a punitive addition to the UK Retail Price Index inflation rate (e.g. RPI + 3%), so the value of the loan cannot be inflated away. The loan cannot be repudiated by declaring bankruptcy. The income tax is imposed irrespective of citizenship or residency, which means the UK HMRC must track the location and income of all loan holders, wherever they are in the world, for several decades.
This confused the hell out of me for some reason. I have been filling out my overseas assessment form and paying back my student loan to the UK from the US for the past 8 years or so and have never once thought of it as a tax - mainly I guess because I pay it directly to "The Student Loans Company" and never thought of dealing with HMRC.

Or have I been doing this wrong? Would this mean I should be filing self assessment forms for UK tax even though I have no UK income?
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Old Jun 7th 2017, 6:45 pm
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Default Re: Student Loans - Global taxation?

From what I know and understand, it isn't classed as a tax (I could be wrong, but this my understanding), but a debt (albeit not a true one). You pay it back via the earnings threshold for whichever country you're in.

Student Loan Repayment - Plan 1 - Overseas thresholds

That's for Plan 1, Plan 2 is on there too.

I'd go with the information you find on the official student loans website, so take a look around on that.
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Old Jun 7th 2017, 6:51 pm
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Default Re: Student Loans - Global taxation?

Originally Posted by Maste View Post
From what I know and understand, it isn't classed as a tax (I could be wrong, but this my understanding), but a debt (albeit not a true one). You pay it back via the earnings threshold for whichever country you're in.

Student Loan Repayment - Plan 1 - Overseas thresholds

That's for Plan 1, Plan 2 is on there too.

I'd go with the information you find on the official student loans website, so take a look around on that.
Thanks! Yeah, I did take a look around there (plus finding out I only have 7 months of payments left!) and couldn't find the word "tax" anywhere.

I just want to make sure I don't need to be filing any self assessment tax forms in the UK (No income there - just student loan payments being made) and when someone said "global tax for UK student loans" it made me a bit anxious that I was missing something haha.

Personal question - have you had to deal with UK student loans while living overseas?
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Old Jun 7th 2017, 6:51 pm
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Default Re: Student Loans - Global taxation?

If it's a tax it begs the question as to whether you can claim a credit for it on your US taxes. .... I believe that the answer would be no, but I might be wrong.
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Old Jun 7th 2017, 6:53 pm
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Default Re: Student Loans - Global taxation?

Originally Posted by Pulaski View Post
If it's a tax it begs the question as to whether you can claim a credit for it on your US taxes. .... I believe that the answer would be no, but I might be wrong.
I have been asking that for years! Most tell me I can't. It seems to be in the wording of "qualified"

You can deduct student loan interest from a foreign country, as long as the loan meets the requirements of being a student loan (a qualified student loan is a loan you took out solely to pay qualified higher education expenses)
I don't see a reason why I would have to file UK self assessment tax forms still
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Old Jun 7th 2017, 9:22 pm
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Default Re: Student Loans - Global taxation?

Originally Posted by livinginUSA View Post
Thanks! Yeah, I did take a look around there (plus finding out I only have 7 months of payments left!) and couldn't find the word "tax" anywhere.

I just want to make sure I don't need to be filing any self assessment tax forms in the UK (No income there - just student loan payments being made) and when someone said "global tax for UK student loans" it made me a bit anxious that I was missing something haha.

Personal question - have you had to deal with UK student loans while living overseas?
You said it yourself there. It's called a 'Loan Repayment' and that's what you're doing. Paying back your loan via a % of your income once you earn a certain amount.

I do have a student loan - but not had any dealings with them whilst overseas as I'm not living abroad. Should I be doing so in the future for any reason, I know what I need to.
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Old Jun 7th 2017, 9:39 pm
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Default Re: Student Loans - Global taxation?

Originally Posted by Maste View Post
You said it yourself there. It's called a 'Loan Repayment' and that's what you're doing. Paying back your loan via a % of your income once you earn a certain amount.

I do have a student loan - but not had any dealings with them whilst overseas as I'm not living abroad. Should I be doing so in the future for any reason, I know what I need to.
Makes sense! Not sure why I thought I'd have to do self assessment taxes as this is not income.

I think sometimes I worry I missed something obvious when I moved away from the UK haha - especially when I learnt that US citizens file US taxes no matter where they live. I worried for a while the UK had the same thing, but thankfully it's based on residency
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Old Jun 7th 2017, 10:03 pm
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Default Re: Student Loans - Global taxation?

Originally Posted by livinginUSA View Post
Makes sense! Not sure why I thought I'd have to do self assessment taxes as this is not income.

I think sometimes I worry I missed something obvious when I moved away from the UK haha - especially when I learnt that US citizens file US taxes no matter where they live. I worried for a while the UK had the same thing, but thankfully it's based on residency
Well all SLC care about is the fact you're one of a small % of past students who now live abroad but actually pay. I read that a lot of students move abroad for work and don't check how to repay.
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