Guide 1 of 16 in Tax and Self-Assessment
Student Loan Repayments When Self-Employed
If you have a student loan and you are self-employed, your repayments work differently from someone in a PAYE job. Nobody takes it from your pay automatically. Instead, it gets added to your Self Assessment tax bill in January. That catches a lot of people off guard.
Quick rule of thumb: Your student loan repayment is calculated on your profit above your plan's threshold - not your turnover. It is 9% of the amount over the threshold (6% for postgrad loans). It all lands in your January tax bill.
Tip for new starters: Student loan repayments are NOT included in payments on account. Your entire student loan amount for the year hits your January bill in one go. Budget for it separately.
How It Works for Self-Employed
When you are employed, your employer deducts student loan repayments from each payslip. Simple.
When you are self-employed, HMRC calculates your student loan repayment based on your annual profit (your Self Assessment tax return). The full amount is added to your January tax bill.
This means your student loan repayment arrives alongside your income tax, National Insurance, and any other amounts due - all in one bill, all at once.
Current Thresholds (2025-26)
| Plan | Annual Threshold | Repayment Rate | Who Has This |
|---|---|---|---|
| Plan 1 | £26,065 | 9% | England/Wales students who started before Sept 2012, all NI and Scottish students before 1998 |
| Plan 2 | £28,470 | 9% | England/Wales students who started from Sept 2012 |
| Plan 4 | £32,745 | 9% | Scottish students who started from Sept 1998 |
| Plan 5 | £25,000 | 9% | England students starting from Sept 2023 onwards |
| Postgrad Loan | £21,000 | 6% | Postgraduate Master's or Doctoral loans |
If you have both an undergraduate and a postgrad loan, the rates stack. You could be paying 9% plus 6% (15% total) on the profit above both thresholds.
Finding Your Plan
Not sure which plan you are on? Check your online Student Loans Company (SLC) account at gov.uk. Or call the SLC directly on 0300 100 0607. They can confirm your plan type, outstanding balance, and repayment history.
Your Self Assessment tax return will ask you to confirm which plan you are on. Getting this wrong means HMRC calculates the wrong amount, so check before you file.
Worked Examples
Example 1: Plan 2, Profit of £30,000
Your profit: £30,000 Plan 2 threshold: £28,470 Amount above threshold: £1,530 Repayment: 9% of £1,530 = £137.70 for the year
Example 2: Plan 1, Profit of £35,000
Your profit: £35,000 Plan 1 threshold: £26,065 Amount above threshold: £8,935 Repayment: 9% of £8,935 = £804.15 for the year
Example 3: Plan 2 + Postgrad, Profit of £35,000
Plan 2 repayment: 9% of (£35,000 - £28,470) = £588 Postgrad repayment: 6% of (£35,000 - £21,000) = £840 Total: £1,428 for the year
That is two separate deductions on the same profit.
The January Shock
This is where self-employed people get burned. Here is a realistic scenario for someone in their first couple of years:
You earn £30,000 profit. Your January Self Assessment bill arrives:
| Item | Amount |
|---|---|
| Income tax | ~£2,000 |
| Class 4 National Insurance | ~£800 |
| Student loan (Plan 2) | ~£138 |
| Total January bill | ~£2,938 |
If this is your second year, you may also owe payments on account for the following year, which could double your January bill. But your student loan is NOT included in payments on account. It sits on top, but only once per year.
The fix is simple: set aside money monthly. If you expect a £138 student loan repayment, that is about £12 per month. Not painful if you plan for it. Very painful if it surprises you in January on top of everything else.
Tip for new starters: Use a separate savings account for tax. Each month, move 25-30% of your profit into it. That covers income tax, NI, and student loan in one go. When January arrives, the money is already there.
Should You Overpay?
Almost certainly not.
Martin Lewis and MoneySavingExpert are clear on this: voluntary overpayment of student loans rarely makes financial sense. Here is why:
- Plan 2 loans are written off after 30 years. Most graduates will never repay the full balance. If you overpay, you may end up paying back more than you would have if you had just made normal repayments.
- The money you overpay is gone. You cannot get it back. If you put that same money into a pension or ISA, it grows and stays yours.
- Interest rates on Plan 2 are high, but irrelevant if you never clear the balance. Think of it as a graduate tax, not a debt.
The only time overpaying might make sense is if you are close to clearing the balance entirely and your repayments would otherwise drag on for years. Check your SLC balance and do the maths before making any lump sum payments.
What to Do Next
- Log into your SLC account and confirm which plan you are on.
- Check your outstanding balance.
- Estimate your repayment for this tax year using the thresholds above.
- Add that amount to your monthly tax set-aside.
- Make sure your Self Assessment return has the correct plan type selected.
Who to Contact
- Student Loans Company (SLC) - 0300 100 0607 (Free). For balance queries, plan type, repayment history.
- HMRC Self Assessment helpline - 0300 200 3310 (Paid). For tax return queries.
- MoneyHelper - 0800 138 7777 (Free). Impartial guidance on student loans and debt.
- MoneySavingExpert - moneysavingexpert.com/students/student-loan-repay (Free). Martin Lewis student loan guides.
Sources
- Student Loans Company, Repayment thresholds 2025-26
- HMRC, Self Assessment and student loan repayments guidance, 2024
- MoneySavingExpert, "Should I overpay my student loan?", 2024
- gov.uk, Student finance repayment guidance, 2024
Related Guides
- Self-Assessment for Hairdressers
- Payments on Account Explained
- Tax Set-Aside Calculator
- Cash Flow Management
- Setting Up Record-Keeping
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Key Contacts
Student Loans Company (SLC)
0300 100 0607 . For balance queries, plan type, repayment history.Free
HMRC Self Assessment helpline
0300 200 3310 . For tax return queries.Paid
MoneyHelper
0800 138 7777 . Impartial guidance on student loans and debt.Free
MoneySavingExpert
moneysavingexpert.com/students/student-loan-repay . Martin Lewis student loan guides.Free