University graduate and thinking about registering self-employed? Unfortunately as a freelancer, contractor or small business owner you will still need to repay your student loan and will have to do so via your annual Self Assessment tax return (Jan 31st).
Rules state that if you received your student loan before 01/09/12 you’ll need to begin repayments once your salary has reached £17,494 or more. This is commonly referred to as Plan 1.
If you took out a student loan after or on 01/09/12 you will need to begin repaying once you are earning above £21,000. Referred to as Plan 2.
You should be aware that the two above threshhold plans are relevant for the tax year of 2016/2017. Plan 1 is reviewed by HMRC each year.
How are the repayments calculated?
If you are completing self assessment, you will need to be aware that in some cases HMRC will calculate the amount you need to pay, and accompany it with your tax bill and national insurance liability. In some cases, and depending on the date you submit your return, you may need to calculate this yourself or get an accountant to help you do so. Your student loan repayments are calculated by taking into consideration your income minus expenses for the year.
How is the payment processed?
I you pay student loan repayments via self assessment, HMRC takes the payment and then passes it on to the Student Loan Company, who then update your loan account accordingly.