Plan 1 loans: How are student loan repayments calculated under Self Assessment?
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In very basic terms, Plan 1 student loan repayments are due at a rate of 9%:
- on your earnings over £19,390 a year (from 6 April 2020; for 2019/20 the threshold was £18,935), 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 £19,390 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. She works part-time at Company A earning £13,500 a year. As she is not earning above the threshold, she does not have to make repayments.
In April 2020, she gets another part-time job for Company B, earning £7,000 a year. Note: Company B is not in any way related to Company A.
Even though her total earnings are now £20,500 a year, neither employer has to deduct student loan repayments because each employment is within the £19,390 threshold.
But she has to file a tax return for 2020/21 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 £22,500 – that is £13,500 from Company A + £7,000 from Company B and £2,000 profits from her freelance work.
This is £3,110 above the £19,390 student loan repayment threshold, so she has to pay 9% x £3,110, £279.90, in student loan repayments through her Self Assessment.