Good question! First, let me say that the information below is aimed at people who have studied in the UK and took out a Student Loan to cover course fees.
Student Loan plans
There are several Student Loan plans, depending on when you took out your Student Loan and the type of degree you studied for. You may be on plan 1, 2, 3, or 4. Plan 5 starts in August 2023!
Each plan has a different repayment threshold and interest rate.
Student loans and repayment plans can be expensive, but there is some good news if you work overseas on a Superyacht, or ship and you spend most of your time overseas.
Should I contact my Student Loan Company if I work on a Superyacht?
Yes. All students will have received a notification from your Student Loan Company (SLC). If you have just finished your degree and went to see it is likely that there is a letter on your doorstep, please do not ignore it!
The SLC will probably want to know what you are up to, as the loan is outstanding, and they have not heard from you. You should tell the SLC about your personal situation via your student loan account after you have read this blog, as there is some important information about overseas income and the Seafarers Earning Deduction Scheme.
Customers who are contacted by their SLC must complete or update your online portal. One of the questions on the SLC forms asks about overseas income. You would naturally say “yes” as you receive overseas income from your yacht Ship. The result of ticking “yes” will cause the Student Loan Company to ask you to start repaying your student loan.
If you work at sea, you may be eligible for the Seafarers Earning Deduction Scheme or SED for short ( I will explain more about SED below). If this is the case, although you receive overseas income, the rules are slightly different for you.
When corresponding with the SLC, it is crucial that if you are eligible for SED, you tick “No” when asked about overseas income. If you have ticked Yes to overseas Income, contact your SED and ask your SLC to recognise your SED status. For your records, ask that the SLC email you or write to you confirming recognition of your status.
I work on a Superyacht/Cruise ship, do I have to repay my student loan?
First, if you work on a Superyacht or ship under a contract of employment, you are classed as a Seafarer.
Seafarers that spend more than 183 days outside the UK will likely fall under the Seafarers Earning Deduction Scheme, or SED for short. More on SED below.
If you meet SED requirements, you will not pay income tax on your salary earned from the yacht/ship, and you won’t need to start repaying your Student Loan.
What is the Seafarers Earning Deduction Scheme (SED)
Seafarers Earning Deduction Scheme, or SED for short, is part of UK tax law which recognises that Seafarers spend a large proportion of the year outside the UK.
You may have heard that your salary is tax-free if you work on a Superyacht. This is true if you comply with SED regulations. It is not true if you don’t.
As you can imagine, SED is complicated with many moving parts. The basic principle is that if a Seafarer spends more than 183 days outside the UK in a given calendar year, then any income earnt on a Superyacht, ship, or any other commercial vessel registered outside the UK will be free of income tax. This is a short explanation; as I say, there are parts to SED; for a full explanation, you can read our comprehensive guide to the Seafarers Earning Deduction scheme to fill in the blanks.
What do I need to do?
Make sure you complete your Self Assessment.
If you comply with SED rules and have no additional income, your tax return will show a “net taxable income” of zero.
No student loan payments are required if your net taxable income is zero.
Please note: Your net taxable income will likely be positive if:
- You have additional income from other sources, i.e., investments, property, etc.
- You have additional overseas income
- You no longer comply with the Seafarers Earning Deduction scheme,
- You leave the yachting or cruise industry and work for a land-based company
- You are self-employed
Student loan repayments are required if you have a positive taxable income. The repayments will be determined by the type of plan, taxable allowance, and additional income. If you are unsure about all these rules and would like some help, please consider signing up for Flying Fish’s Seafarers Tax Service. We can make all these problems go away!
What if I am self-employed or employed on a ship through an agency?
All Seafarers that are self-employed or employed via an agent and do not have a contract with the yacht or ship are not eligible for SED. If this is the case, you will most likely have to start paying off your student loan.
I work overseas, do I need to pay back my Student Loan?
If you found a land-based job overseas ( but not on a ship or Superyacht), then you will have “overseas income”. Overseas income must be declared to HMRC via a Self-Assessment tax return. If you are employed overseas for over three months, you must contact your Student Loan Company (SLC) and complete their online form.
I have decided to leave yachting, do I have to pay back my Student Loan?
If you leave the yachting industry and return home, you will, I’m sure, start a new career. If you work for a company, and are paid through the PAYE scheme, then a deduction will be taken from your salary to pay back the loan. If you would like somebody to do the hard work for you, then consider signing up for our Seafarers Tax Service