Student loan repayments if you're self-employed
If you’re employed, your student loan is taken from your pay automatically. If you’re self-employed, or complete a Self Assessment tax return for another reason, it works differently, and the first return after you start earning above the threshold can come as a shock.
It goes through Self Assessment
HM Revenue and Customs (HMRC) works out how much you repay each year from your Self Assessment tax return, based on your income for the whole year. You pay at the same time as you pay your tax. There’s no separate bill from the Student Loans Company for that portion.
The calculation is the one you already know: your plan’s rate on income above your plan’s yearly threshold. See how much will I repay? for the formula and current figures.
If you’re also employed
If you earn over the minimum amount, your employer will deduct repayments from your salary as normal. On your tax return, HMRC then looks at your combined income for the whole year.
GOV.UK’s example: someone on Plan 1 with £32,000 self-employment income and a £10,000 job has combined income of £42,000. That’s over the Plan 1 threshold, so the repayment is worked out on the amount above the threshold. Repayments already taken from the salary are deducted from what’s owed.
Check your payslips or P60 to see how much you’ve already repaid during the tax year. You’ll need that when you fill in your return. The tax year runs from 6 April to 5 April.
What else counts
GOV.UK also says that if you get pension income, HMRC uses your total annual income, including workplace, private and State Pension. See student loan repayments and pension income. For other kinds of income on your return, check HMRC’s guidance for your situation.
Making it manageable
- Set aside a share of every payment you receive for tax and student loan, rather than working it out at the end. Because it’s worked out on your income for the whole year and paid alongside your tax, it arrives as one lump rather than in monthly instalments.
- Keep the plan type correct on your return. It’s on your Student Loans Company account. If you hold two loans, both count.
- Don’t confuse repayments with an overpayment. Repayments through your tax return are compulsory. A voluntary extra repayment is separate; see how to make a student loan overpayment.
Should you overpay while self-employed?
Income that varies year to year makes it harder to know whether you’ll repay in full, which decides whether overpaying helps. See should I overpay my student loan? and consider keeping a cash buffer for lean months, since extra repayments can’t be refunded.
Source: GOV.UK, Repaying your student loan. This is general information, not tax advice. Check GOV.UK or ask an accountant about your own situation, and see the disclaimer.