Student Loan Repayments

I have a student loan balance and am unsure how much my student loan repayments will be and how they are paid. I am a business analyst trading through my own limited company and for the 2016/17 tax year will be extracting a combination of salary and dividends totalling £50,000, with no other sources of income.

student loan repayments

Answer, August 2016

If you studied in the United Kingdom and have a student loan balance that was taken out after August 1998 then HMRC is responsible for collecting the repayments – these student loans are known as ‘income contingent loans’.

The amount of repayments due for the 2016/17 tax year will depend on whether you are on the ‘Plan 1′ or ‘Plan 2’ student loan.

These are new categories that have been implemented from the 2016/17 tax year.

If you lived in Scotland or Northern Ireland when you started your course, or you lived in England or Wales and started your course before 1 September 2012 then you have Plan 1.

If you lived in England and Wales and started your course on or after 1 September 2012 then you have Plan 2.

For 2016/17 you will pay back 9% of your total earnings above the thresholds, which are:

  • £17,495 for Plan 1 (£1,457 a month)
  • £21,000 for Plan 2 (£1,750 a month)

If you are in a job then your employer will deduct your student loan repayments on your behalf and pay these to HMRC, but if you’re in the self assessment tax return system your repayments will be calculated through this, and will take into account any deductions already made in your employment, if relevant.

Returning to the question at the beginning of this article, the total earnings for the taxpayer are £50,000, being a combination of salary and dividends – both dividends and salary count as earnings for student loan repayment purposes (as well as any other earnings you might have, such as interest income).

If the taxpayer is on Plan 1 then the student loan repayments due will total £2,925 for the 2016/17 tax year (£50,000 less £17,495, x 9%)

However, if the taxpayer is on Plan 2, the repayments will total £2,610 (£50,000 less £21,000, x 9%)

For the 2016/17 tax year you will need to file your tax return by 31 January 2018 and your tax, including student loan repayments, will be due by the same date.

Also worth pointing out is that student loan repayments do not form part of self-assessment payments on account.