Plan 1 loans: How are student loan repayments calculated under Self Assessment?
In very basic terms, Plan 1 student loan repayments are due at a rate of 9%:
- on your earnings over £18,935 a year (from 6 April 2019; for 2018/19 the threshold was £18,330), whether from employment or self-employment
- on other income over £2,000 a year if you are required to fill in a tax return under Self Assessment.
Previously, we gave the example of Katrina having two jobs, in neither of which she earned over the £18,935 threshold. If she were required to complete a tax return, for example because she also does some self-employed work, then her student loan repayments would be calculated accordingly.
Katrina has a Plan 1 income-based student loan. When she graduated, she could not find a full-time job so took on part-time work with Company A earning £13,500 a year. As she is not earning above the threshold, she does not have to make repayments.
In April 2019, she gets another part-time job for Company B, earning £6,000 a year. Note: Company B is not in any way related to Company A.
Even though her total earnings are now £19,500 a year, neither employer has to deduct student loan repayments because each employment is within the £18,935 threshold.
But she has to file a tax return for 2019/20 as she has also £2,000 of profits from freelance work (assuming Katrina has already deducted the trading allowance when calculating her profits of £2,000). Her total earnings add up to £21,500 – that is £13,500 from Company A + £6,000 from Company B and £2,000 profits from her freelance work.
This is £2,565 above the £18,935 student loan repayment threshold, so she has to pay 9% x £2,565, £230.85, in student loan repayments through her Self Assessment.