While you were studying at university, loans from the Student Loans Company to cover the cost of fees and maintenance costs may have seemed like a godsend. But once you’ve donned the cap and gown and began post-student life in the workplace, you’re faced with the joyous task of having to repay them. 
If you’re a permanent or agency employee, you’ll likely give these repayments little thought. Like income tax and national insurance contributions, student loans are deducted for you, before you receive your net income. And unless you keep a close eye on your payslips, you may not even know how much you’re repaying each month. 
For contractors, this responsibility is all yours at the end of each financial year, so it’s important to be aware of how and when you should go about making repayments. 
How much do I need to repay? 
Depends on whether you are on Plan 1 or Plan 2. 
Plan 1 
You're on Plan 1 if you're: 
an English or Welsh student who started your undergraduate course before 1 September 2012 
a Scottish or Northern Irish student 
On Plan 1, the repayment threshold is £18,330 per year - so once your earnings exceed this, student loan repayments are calculated at 9%. 
Plan 2 
You're on Plan 2 if you're: 
an English or Welsh student who started your undergraduate course on or after 1 September 2012 
On Plan 2, the repayment threshold is £25,000 per year - so once your earnings exceed this, student loan repayments are calculated at 9%. 
It’s worth bearing in mind that these are the figures for the 2018-19 financial year, and you should check the Student Finance website to find out if these figures have changed by the time you’re completing your self-assessment. 
For permanent and agencies employees, HMRC will deduct 9% of an employee’s gross monthly income, regardless of the loan amount to repay. For example, if two employees both earn £25,000, one of whom has £10,000 in student loans, and the other has £3,000, both will pay £30 a month if their loan was provided by the Student Loan Company in England or Wales. 
Self-employed individuals should calculate their repayments in the same way. 
How do I make the repayments? 
There are a couple of ways in which self-employed contractors can make their repayments. The first is to simply calculate the amount due each year, based on 9% of gross income, and declare this on the your personal tax return, which should be submitted by the 31st January each year. 
For contractors who work throughout the year on both a self-employed and employed basis, some of your student loan repayments will automatically be calculated by your employer. Repayments over this amount should be calculated separately. 
Lastly, if you’d prefer to make the payments throughout the year, instead of declaring 9% of your earnings at the end of January, you can pay Student Loans directly, as frequently as you like. With this option, you can also choose to set up a monthly direct debit, increase the payment amount, make additional one-off payments, or pay the remainder of the balance. 
If you’d like to discuss the best repayment option for your employment situation, or have any queries about student loans or self-assessment in general, please feel free to get in touch. 
Written by: 
Nicola J O'Sullivan -  
Effective Accounting 
Founder | Xero Champion | IR35 Expert 
Share this post:
"I couldn't recommend them highly enough and will continue to use them for Spiral Static and all future ventures!" 
Matt Badley | Spiral Static 
"I have found their help in modernising my accounts invaluable and would recommend them to anyone in a heartbeat." 
Matthew Finch | Trailer Aid Ltd 
"The whole team at effective accounting are exceptional."  
Jennifer Duthie | Skribbies Ltd 
"Nicola is one of the most adept and accessible accountants that I have ever had the pleasure of working with." 
Carter Stewart | Transworld Consulting Ltd 
"Choosing Effective Accountants has been one of the best decisions we made when we started our company."  
Matthias Geeroms | OTA Insight Ltd 
"Nicola and the team have proven to be extremely professional, efficient and always on hand to answer any questions I have (and I have a lot!)." 
Emily Hodges | EM Hodges Ltd 
"I find the service to be prompt, professional and friendly." 
Simon Weightman | Mercury TS Ltd 
"They are quick to respond and are always ahead of the curve for us. Keep it up and thank you." 
Freda McMahon | Lobster Noodle Ltd 
Our site uses cookies. For more information, see our cookie policy. Accept cookies and close
Reject cookies Manage settings