Many graduates leave university with debts, it's a fact of modern academia. Grad Central understands that proper money management can be difficult, so we have gathered together some advice to help you understand some important financial aspects of your employment and some of the typical taxes you will encounter in the wider world.
Repaying your student loan
Your student loan repayments normally start on the 6th of April after the year of graduation. Repayment plans in the UK are separated into two main categories, depending on the year your studies commenced. If your studies commenced after 1998, which is the case for most graduates, then your repayment plan is based on your annual income. According to current regulations if you earn more than £15,000 before tax deductions then you will be required to start paying the instalments immediately after the 6th of April after the year of graduation.
Understanding income tax - PAYE
Income tax is a standard contribution you pay to the government as a return to the benefits you enjoy in a developed society such as transportation, health care, defence, etc. The tax is deducted directly from your pay and is scalable. Broadly speaking, the first £5,000 are tax free (called tax allowance), the next £2,000 are taxed by 10%, then he next £32,000 by 22% and anything above that by 40%. On top of income tax, there is an additional 9% National Insurance contribution for your state pension and other social security benefits.
Managing your finances
Sound financial budgeting is essential in order to maintain a good standard of living and at the same time cut down on unnecessary expenses. Carefully planning your expenses such as rent, utility bills or any possible loan repayments can help you control your budget and ensure that you don't overstretch your finances.
Correct management of your bank account is an absolute necessity to controlling your finances. Most accounts usually provide some standard services so that you can transfer money in and out, write cheques, pay bills by standing order and direct debit and use a debit or credit card to make purchases and withdraw cash from ATMs. Using these features sensibly and keeping good records of how you are moving or withdrawing money will help avoid any unexpected overspending.
If you've recently graduated, you'll find that lots of banks offer accounts that are tailored to the needs of graduates specifically. They often offer low-interest overdrafts and various discounts on financial products that can help reduce your outgoings. These accounts are valid for a set period after graduation, and can be a real benefit as you start your new career.
Council tax
As a student living with other students you will have been exempt from paying council tax. Now that your situation has changed you will need to understand how council tax is calculated and what you will need to pay.
Council Tax is a tax paid to your local council for the services it provides such as rubbish collection, policing and parking facilities. Council tax applies to all domestic properties. Based on its value, each property belongs to a particular band (A-H) which determines the rate of the tax. Council tax can be paid either as a lump sum or in monthly instalments.
If you are the sole tenant of the property then you are entitled to a 25% discount. To apply for such a discount you need to contact your local council by phone of fill in the necessary documentation online. If you are still in full time education then you may apply for a full exemption.
For more detailed information concerning employment financial matters, either use the links below or speak directly to your university's careers service.
External links & resources
Student Loan Repayment Information
Income Tax
Council Tax
Online tools
Free PAYE Income Calculator - calculate your net income
Student Loan Calculator - calculate your student loan repayments
Online Budget Calculator - help to control your budget and finances