What do I need to know about student loan repayments as a self-employed worker?

Repaying your student loan

Whether you’re employed or self-employed, you only need to start repaying your student loan once your income reaches the threshold amount for your repayment plan.

Your income amount is the figure you earn before tax and deductions and the thresholds change on the 6th of April each year.

The repayments will stop immediately should you stop working or your income goes below the threshold.

There are several different student loan repayment plans; the one you fall under will depend on when you started your course.

For example, you’re on:

• Plan 1 if you started your course before the 1st of September 2012
• Plan 2 if you started between the 1st of September 2012 and the 31st of July 2023
• Plan 4 is for those who applied to Student Awards Agency Scotland
• Plan 5 if you started on or after the 1st of August 2023

The amount you need to repay depends on your plan:

• Plan 1 – you’ll only start repaying once your income is over £480 a week (£2,082 a month, or £24,990 a year)
• Plan 2 – you’ll only start repaying once your income is over £524 a week (£2,274 a month, or £27,295 a year)
• Plan 4 – you’ll only start repaying once your income is over £603 a week (£2,616 a month, or £31,395 a year)
• Plan 5 – you’ll only start repaying once your income is over £480 a week (£2,083 a month, or £25,000 a year)

The amount you pay will be equal to 9% of your income over the threshold.

There’s also interest to take into account too, which is determined by the plan you’re on, so:

• Plan 1 (6.5%)
• Plan 2 (8%)
• Plan 4 (6.25%)
• Plan 5 (8%)

Repaying your student loan as a self-employed professional

As mentioned previously, an employed worker will have their student loan repayments sorted out for them with the correct figure deducted from their payslip each month.

As a contractor, you will need to pay off your student loan through your annual self-assessment tax return.

If you have only recently completed a course, then it’s worth noting that you don’t need to start repayments until the April after you’ve finished your studies; or the April four years after if studying part-time.

Do I need an accountant?

If the thought of working out your student loan repayments feels a bit daunting, then an accountant will be able to help you out with this, as well as advising and guiding you with other financial aspects of running your own business.

An accountant will be able to fill in and file forms, ensure you remain compliant with your financial liabilities, keep on top of important deadlines and provide useful financial advice that you might not have been aware of (which could potentially save you money in the long run).

For more information on how to find a good accountant, take a look at our Is it Easy to Switch Accountants? page.

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