When employed by someone else, you don’t typically need to worry about your student loan repayments; your employer handles it all for you. But when you’re self-employed, it can require a little more manual work.
If you’re a freelancer, contractor, or small business owner, you need to make sure your student loan is included in your Self Assessment Tax Return.
How and when do you need to make repayments?
Before worrying about how you need to make repayments, you first need to check whether you need to make them.
Firstly, you need to make sure you should be making repayments in the first place, which depends on the type of study you completed. If you completed full-time study, you start repaying the April after you finish your course. However, if you completed part-time study, you either start repaying the April four years after the start of your course or the April after you finish your course, whichever comes first.
Secondly, you need to make sure you’re earning above the repayment threshold for the plan type you’re on. For up-to-date information about the earnings thresholds, check out the GOV.UK website.
You only need to make repayments if both of these conditions have been met.
When it comes to making repayments, they’re made through the tax system.
If you’re a company director and taking your pay through the company’s payroll software, this is all handled for you with HMRC working out how much you need to repay based on the Self Assessment Tax Return you file.
If you’re not using payroll software, it’s all handled through the Self Assessment. When HMRC calculates the amount of tax you need to pay, your student loan contribution will be added on to it. Once you’ve made the payment to HMRC, they will pass on the contribution to the Student Loans Company.
To inform HMRC you have a student loan, you need to tick a box when filling out your Self Assessment online. HMRC then does the rest.
What happens if you’ve almost paid off your loan?
If you’ve almost paid off your loan, and it looks as though you will within the next two years, you can avoid overpaying by informing HMRC as part of your Self Assessment.
Simply state that you will likely pay it off within the next two years, and they’ll do the rest.