They will start paying back any loans as well as any interest the April after they finish university, but only if earning more than £25,725 a year (as of April 2019).
They will need to repay 9 per cent of everything they earn above the £25,725 threshold each year.
So, for example, if they earn £29,000 a year, this is £3,275 above the £25,725 threshold.
That means they would have to repay 9 per cent of £3,275 that year, which comes to £294.75.
If they do not earn over £25,725 then they do not have to pay anything back.
Managing their money
1. The banking app
There is now a vast array of apps from the mainstream banks which really do help customers manage money better.
Monzo’s app, for example, has several features for managing money, overdrafts and savings, and allows access to the customers other accounts through open banking.
These features are also much more common now among traditional providers.
Most apps now allow you to organise your bills, encourage you to save as soon as you are paid and allow easy transfer of money between accounts.
It is worthwhile getting familiar with what is available in the market and encouraging your customers to take advantage of the innovations available.
2. Savings
Achieving returns in a low-interest-rate environment is challenging but getting into the savings habit at an early age has proven positives for the long term.
Some may also be interested in trying their hand at investment – there are lots of options out there that allow people to ‘drip-feed’ small amounts, and that can really add up.
For the more cautious, ISAs are still worth considering.
Individual Savings Accounts (ISAs) are the easiest to use and understand. Essentially the basic cash ISA allows a saver to pay in up to £20,000 a year and enjoy tax free interest.
However, with the introduction of the Personal Savings Allowance in 2016 a basic rate taxpayer can receive the first £1,000 of interest tax free, regardless of the type of savings account they use.
(This reduces to £500 for higher rate taxpayers.)
This means that, in order to gain the same annual tax-free advantage from a cash Isa, you would need to get an interest rate of 5 per cent on a balance of £20,000 – a rate which is currently unavailable in the UK.
The best advice to savers is to watch for the tipping point between the amount saved and the tax advantages that can be gained through saving in other accounts.
Savings in the short term are likely to be better off chasing the best rate of interest available.
Help to Buy ISAs have now closed for new business; however existing accounts can continue to receive funds until November 2029.
