Making Student Loan Repayments Through Self-Assessment
If you have a student or postgraduate loan, there are three primary ways you can make your loan repayments:
- Through deductions from your wages or salary via the PAYE system
- Direct payments to HMRC through the Self-Assessment system
- Directly to the Student Loans Company (SLC)
Typically, repayments begin from the start of the tax year following the year you finish or leave your course. If you’re employed, your employer will handle the deductions and pass them on to HMRC, who then forward the repayments to the SLC. However, if you’re self-employed or have additional income, your repayments might be handled differently through the Self-Assessment system.
Understanding Repayment Thresholds
Repayments on student loans only kick in once your income surpasses the repayment threshold for your specific loan plan. For the tax years 2023/24 and 2024/25, the annual repayment thresholds are as follows:
| Loan Type | 2023/24 Threshold | 2024/25 Threshold |
| Plan 1 Student Loan | £22,015 | £24,990 |
| Plan 2 Student Loan | £27,295 | £27,295 |
| Plan 4 Student Loan | £27,660 | £31,395 |
| Postgraduate Loan | £21,000 | £21,000 |
For Plan 1, Plan 2, and Plan 4 loans, you’ll repay 9% of any income above the relevant threshold. For postgraduate loans, the repayment rate is 6% on income above the threshold. The repayment method—whether through PAYE or Self-Assessment—doesn’t change these percentages.
Making Repayments Through Self-Assessment
If you’re self-employed or have income that isn’t taxed through PAYE, you’ll need to make your student loan repayments through the Self-Assessment system. For those who are both employed and self-employed, you’ll repay through both PAYE and Self-Assessment. However, any amounts already repaid via PAYE will be deducted from the total amount due when you complete your Self-Assessment tax return.
Considering Unearned Income
Unearned income, such as savings interest or rental income, is included in the calculation for student loan repayments if it exceeds £2,000 in a tax year. If your unearned income is less than £2,000, it’s excluded from the calculation.
Example:
Shanice earns £30,000 from her job in the 2023/24 tax year. She also makes £4,000 in profits from her freelance art business and earns £800 in interest from her savings. She has a Plan 2 student loan.
- Her employment income exceeds the Plan 2 threshold of £27,295 by £2,705, resulting in her employer deducting £243 in student loan repayments (9% of £2,705).
- When Shanice completes her 2023/24 tax return, her total income is £34,800. However, since her unearned income (£800) is below the £2,000 threshold, it’s not included in her student loan repayment calculation.
- Her student loan repayment is therefore based on her earned income of £34,000, resulting in a total repayment of £603 (9% of £34,000 – £27,295). After accounting for the £243 already paid through PAYE, Shanice has a balance of £360 to pay by 31 January 2025 via Self-Assessment.
Be Wary of Payrolled Benefits
Last year, HMRC had to issue apologies after errors were discovered in the calculation of student loan repayments. These errors occurred because payrolled benefits were mistakenly included in the repayment calculations when they should have been excluded. While HMRC is now aware of the issue, it’s still wise to double-check that payrolled benefits haven’t been wrongly included in your repayment calculations.
Need Help with Your Self-Assessment?
Navigating student loan repayments through Self-Assessment can be tricky, especially with additional income streams and potential errors to watch out for. If you need guidance, the team at Jon Davies Accountants is here to help. Get in touch with us today to ensure your repayments are accurate and you’re on top of your tax obligations.
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