Becoming self-employed and setting yourself up as a sole trader is a big step. Factor in having to complete your self-assessment tax return on time and knowing when to start paying off your student loan and it can all start to seem a little daunting.
That’s why we’ve put together a step by step guide which gives you everything you need to know when it comes to getting you started, giving you one less thing to worry about.
1. Find your repayment plan
The Government has three plans in place:
- Plan 1: applies to English or Welsh students who started an undergraduate course in the UK before 1 September 2012 and students who took out loans in Scotland and Northern Ireland.
- Plan 2: applies to students who started studying after 1 September 2012.
- Postgraduate Loan: EU students and those who took out Postgraduate/Masters loans can find out more about their repayment plans here.
2. When do repayments start?
You won’t start paying back a student loan until your income is over a certain threshold amount. These amounts change each year, usually on 6 April.
The earliest date you will start to repay your loan is:
- The first April after you leave your course
- The April 4 years after the course you started (if you’re studying part-time)
Breakdown of 2019/20 tax year loan repayment thresholds (before tax and deductions):
|When income goes over:||Who must start repaying?|
|£364 per week / £1,577 a month||Plan 1 students|
|£404 per week / £1,750 a month||Postgraduate loan students|
|£494 per week / £2,143 a month||Plan 2 students|
3. How are repayments processed?
Repayments are automatically deducted from your salary just like tax and national insurance. You can make extra payments via your online account using a debit card, by setting up a direct debit or by cheque or bank transfer.
4. What impact does being self-employed have on my repayments?
If you’re self-employed, you will need to complete a Self Assessment tax return. You can read our recent blog “Guide to completing your Self Assessment Tax Return” which covers:
- What you need to know before filing a Self Assessment Tax Return for 2018/19
- What is a Self Assessment and are you included?
- What’s the process?
The deadline for completing a Self Assessment paper return for 2018/19 was October 2019. Online returns must be filed by midnight on 31 January 2020.
5. What to do if you miss any deadlines
If you are self-employed and you have not yet submitted your paper Self Assessment tax return to the tax office (i.e. you have missed the 31st October 2019 deadline) you will need to work out the repayment amount to be included in your Self Assessment Return.
How much you repay depends on the plan you are on.
- If you are on Plan 1 or Plan 2 you will have to pay 9% of the amount you earn over the threshold
- If you are on the Postgraduate Loan you will have to pay 6% of the amount you earn over the threshold
|Plan 1||Earnings this month (variable)||Earnings over the monthly threshold of £1,577||Amount due to be paid back this month at 9%|
|Plan 2||Earnings this month (variable)||Earnings over the monthly threshold of £494||Amount due to be paid back this month at 9%|
|Postgraduate loan||Earnings this month (variable)||Earnings over the monthly threshold of £1,750||Amount due to be paid back this month at 6%|
For further information on the student loan repayment process visit GOV.UK
Find out more
If you have any questions or if you would like help with your Self Assessment tax return, please get in touch with one of our team.