How the repayment is worked out
On your tax return you tick the box to say you have a student loan and choose your plan type. HMRC then calculates the repayment on your total income for the tax year: self-employed profits, any salary, and unearned income (such as savings interest, dividends or property income) if that unearned income is more than £2,000. The £2,000 test is all-or-nothing — at £2,001 of unearned income, the whole £2,001 counts. The threshold is applied once, to the annual total, not month by month.
Worked examples for 2026/27
| Situation | Plan | Total due for year | Already deducted via PAYE | Due via Self Assessment |
|---|
| Self-employed profit £40,000 | Plan 2 | £955 | £0 | £955 |
| Employed £20,000 + self-employed £20,000 | Plan 2 | £955 | £0 | £955 |
| Employed £35,000 + self-employed £10,000 | Plan 2 | £1,405 | £504 | £901 |
| Self-employed £28,000 (Plan 5) | Plan 5 | £270 | £0 | £270 |
The mixed-income examples show the trap. Someone earning £20,000 from a job has nothing deducted through payroll, because each month’s pay is below the Plan 2 monthly threshold. But once the £20,000 of self-employed profit is added on the tax return, total income is £40,000 and £955 becomes due on 31 January. Many people with a side business are caught out by this the first time.
Payments on account do not include student loans
If your tax bill is over £1,000, HMRC asks for two payments on account towards next year’s income tax and Class 4 National Insurance. Student loan repayments are not part of these. That is good for cash flow during the year, but it means the January bill can be larger than you expect: the balancing payment for the previous year, the first payment on account for the current year, and a full year of student loan repayments all fall due together.
Practical tip. Put 9% of every invoice above your threshold into a separate savings pot — on £40,000 of profit with Plan 2 that is about £80 a month — so the January bill is covered.
What counts as income
- Trading profit after allowable expenses (not turnover).
- Employment income, with PAYE deductions credited against the bill.
- Unearned income over £2,000: savings interest, dividends, rental profit. Pension income is included as normal income.
- Income from an ISA does not count, because it is not taxable.
Pension contributions you make personally do not reduce the income used for student loan repayments, even though they earn tax relief. A company director paying themselves through a limited company repays on salary through PAYE and on dividends through Self Assessment if dividends exceed the £2,000 unearned-income limit.
If your income is irregular
Because the self-employed calculation is annual, a lumpy year works in your favour compared with PAYE: a single big month does not trigger a deduction on its own. If your total income for the year is below the threshold, nothing is due. If you also had PAYE deductions in a year when total income was below the threshold, you can ask for a refund.
Getting it right on the return
Choose the correct plan type (see which plan am I on) and tick the Postgraduate Loan box separately if you have one. If you have both Plan 2 and a Postgraduate Loan, both are calculated — 9% above £29,385 and 6% above £21,000 — so a sole trader with £40,000 of profit owes £2,095 for the year.
FAQ
How do self-employed people repay student loans?
Through Self Assessment. HMRC calculates 9% of your total income above your plan threshold (6% above £21,000 for a Postgraduate Loan) and adds it to your tax bill, due by 31 January after the tax year ends.
Are student loan repayments included in payments on account?
No. Payments on account cover income tax and Class 4 National Insurance only. Student loan repayments are paid in full with the balancing payment on 31 January.
Do I pay student loan on savings interest or dividends?
Only if your unearned income is more than £2,000 in the tax year and you file a tax return. If it is over £2,000, all of it is added to your income for the calculation.
What if I am employed and self-employed?
Your employer deducts repayments from your salary through PAYE. On your tax return HMRC works out the total due on all your income and subtracts what was already deducted, so you are not charged twice.
How much student loan will I pay on £40,000 self-employed profit?
On Plan 2, 9% of £40,000 minus £29,385, which is £955 for 2026/27. On Plan 5 it would be £1,350.
Related student loan articles
Student loan when moving abroadOverseas income assessment and repaymentsWhen is my student loan written off?25, 30 or 40 years — find your datePostgraduate Loan repayments6% over £21,000, on top of Plan 2 or 5Repaying two student loans at oncePlan 1 + Plan 2, Plan 2 + PostgraduateHow to get a student loan refundBonus months, low earners and overpayingStudent loan thresholds 2026/27Every plan, per year, month and weekWhich student loan plan am I on?Plan 1, 2, 4, 5 or PostgraduateStudent loan on £40,000Plan 2 £79/mo · Plan 5 £112/moStudent loan on £45,000Plan 2 £117/mo · Plan 5 £150/moStudent loan repayment calculatorAll plans, any salary
Sources
- GOV.UK, Repaying your student loan – what you pay: 2026/27 thresholds Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000, Postgraduate Loan £21,000; 9% (6% for PGL) of income above the threshold; rules for more than one plan (read 3 November 2026).
- Student Loans Company / Department for Education, Student loans interest rates and repayment threshold announcement, 10 August 2026: RPI 4.1%; Plan 1 4.1%; Plan 2 4.1%–7.1% capped at 6%; Plan 3 (Postgraduate) capped at 6%; Plan 5 4.1% (1 Sep 2026 – 31 Aug 2027); Plan 1 threshold £28,005 from 6 April 2027.
- Department for Education press release, Interest rate cap introduced to protect Plan 2 borrowers, 7 April 2026, and written ministerial statement of 13 April 2026: 6% cap for 2026/27; Plan 2 upper interest threshold £52,885 from 6 April 2026.
- Autumn Budget 2025 (26 November 2025): Plan 2 repayment threshold frozen at £29,385 for 2027/28 to 2029/30 (reported by Which?, 5 December 2025).
- Take-home pay: HMRC 2026/27 income tax and National Insurance for England, Wales and Northern Ireland (personal allowance £12,570, 8%/2% employee NI), as used on our UK salary after tax pages.