If you have a student loan and you work for yourself, nobody takes the repayment out of your wages. Instead, you work it out and pay it through your Self Assessment tax return. That catches many new sole traders, including Uber and delivery drivers, by surprise, because a student loan amount appears on the bill alongside income tax and National Insurance. This guide explains how it works and how to plan for it.
Key takeaways
- Self-employed people repay student loans through Self Assessment, not through payroll.
- Repayments are based on your income above a threshold that depends on your loan plan.
- The student loan amount is added to your tax bill and can feed into payments on account.
- You must tick the right boxes on your return and choose the right plan, or the figure will be wrong.
- Set money aside during the year so the bill does not hurt cash flow.
What a student loan repayment is, in tax terms
A student loan repayment is not a tax, but HMRC collects it for the Student Loans Company when you are self-employed or have other income that is not taxed at source. You repay a percentage of your income above a repayment threshold. Both the threshold and the percentage depend on which plan your loan sits under, and a postgraduate loan is treated separately from an undergraduate one. The thresholds change, so always check the current figures on GOV.UK's repaying your student loan guidance rather than relying on an old number you remember.
The key point for sole traders is that the repayment is calculated on the whole tax year. You do not repay monthly as you earn. Instead, HMRC looks at your total income for the year on your return, applies the plan threshold, and adds the result to the amount you owe on 31 January after the tax year ends.
How the repayment is worked out on your return
When you complete your Self Assessment return, there is a section that asks whether you have a student loan and which plan applies. Once you complete it, the software or HMRC calculates the repayment automatically. The calculation uses your income for the year, not just your business profit, so other income reported on your return can increase the amount.
For a sole trader, the starting point is your taxable profit: your self-employed income minus allowable expenses. Our guide to sole trader allowable expenses explains what can legitimately come off. Because the repayment is driven by income, lowering your profit with genuine expenses can reduce the repayment, but only costs that really are for the business count.
Which plan are you on?
UK student loans sit under different plans, depending on where you lived and studied and when you started your course. There are also postgraduate loans, which run alongside an undergraduate loan if you have both. You can have more than one type at the same time, in which case each is calculated separately. Your plan shows in your online Student Loans Company account. If you tick the wrong plan on your return, the repayment will be wrong, and you may find you have repaid too much or too little.
Side by side: employed versus self-employed
| Employed (PAYE) | Self-employed | |
|---|---|---|
| How you repay | Taken from pay by your employer | Added to your Self Assessment bill |
| When you repay | Each pay period | Usually 31 January after the tax year |
| What it is based on | Pay above the plan threshold | Income for the year above the plan threshold |
| Your action | Make sure your employer has the right plan | Tick the loan section and choose the right plan on your return |
Worked example (illustrative)
"Amira", an illustrative example, started driving for a ride-hailing app part-way through the tax year. Her taxable profit for the year is above the threshold for her plan, so a student loan repayment is added to her return. She had not budgeted for it, because she assumed that only employees repay. On 31 January she faces a bill made up of income tax, Class 4 National Insurance, and the student loan repayment, and possibly the first payment on account for the following year too.
Had Amira set aside a share of each week's earnings into a separate savings account, the bill would have been far less stressful. A simple habit is to work out an estimated tax and loan figure every month and move it into that account. The figures here are only an illustration. Your own bill depends on your profit, your loan plan and the current thresholds.
Payments on account and the student loan
If your Self Assessment bill is large enough to trigger payments on account, the student loan repayment can be included in the calculation. This is an area where people get caught out, because the first return can lead to a bill for the year plus an advance payment towards the next year. Read our guide to payments on account for how the advance payments are worked out, and check HMRC's current rules on how student loan repayments are treated.
What if your income falls?
Because the repayment is based on the year's income, a poor year can reduce the amount due. If you have been making payments on account based on a higher previous year, you can ask HMRC to reduce them where you expect lower income. Do this carefully, because reducing payments too far can leave a balance to pay and interest to cover. Keep evidence of why your income is lower.
Limited company directors
If you run your own limited company, the picture is different. A director who is paid a salary through payroll has repayments deducted by the payroll, just like any employee. Dividends and other income reported on a personal return can also count towards the repayment calculation. If you are weighing up whether to incorporate, it is worth modelling the loan effect alongside the tax. Our article on limited company vs sole trader for Uber drivers covers the wider comparison.
Planning your cash flow
The practical difficulty is timing. Because the repayment is settled once a year, the money can feel like it appears from nowhere. A sensible approach is to treat the student loan as one more part of your annual bill, alongside income tax and National Insurance. Open a separate savings account, and each month move across an amount based on your estimated profit. If your profit is irregular, as it often is for drivers and couriers, review the estimate every quarter and adjust. It is better to over-save and keep a pleasant surprise than to under-save and face a shortfall in January.
If you cannot pay the full bill on time, contact HMRC before the deadline to ask about a payment plan, rather than waiting until penalties and interest build up. Keep in mind that the student loan element is collected as part of the same bill, so a payment plan covers the total.
Overpayments and checking your balance
If you have been both employed and self-employed in the same year, repayments could be taken from your pay and also calculated on your return. HMRC takes account of what has already been deducted when it works out the final figure, but it is worth checking your Student Loans Company statement afterwards. If you think you have repaid too much, contact the Student Loans Company to discuss it. Keeping your own record of what was deducted through payslips helps you spot anything unusual.
Common mistakes
- Not ticking the student loan box. If you leave it out, HMRC may not collect the repayment and the Student Loans Company may chase you later.
- Choosing the wrong plan. Check your plan with the Student Loans Company before you file.
- Budgeting for tax only. The repayment is on top of income tax and National Insurance, so include it in your savings pot.
- Ignoring other income. Employment, rental or other income on the same return can raise the figure.
- Inflating expenses to cut the bill. Only claim costs you can support with records.
A simple routine to stay on top of it
Keep digital records of income and expenses all year, so your profit is clear at any point. Each month, estimate your profit so far and set aside a sensible share for tax and any loan repayment. At year end, check your plan type, complete the student loan section of the return, and file before the deadline. If you are new to the process, our registration deadline guide explains when you need to sign up first.
You can also check how repayments work on GOV.UK, where the current thresholds and rules are published.
Not sure what your return will show? Our personal tax service can prepare your Self Assessment, include the student loan section correctly and help you plan the bill. You can also get in touch for a friendly conversation about your situation.
Frequently Asked Questions
How do self-employed people repay a student loan?
If you are self-employed, you repay through your Self Assessment tax return rather than through a payslip. You tell HMRC which type of loan you have, HMRC calculates what you owe based on your income, and the amount is added to your tax bill for the year.
Do I repay on my profit or my turnover?
Repayments are based on your income, and for a sole trader that means your taxable profit after allowable expenses, not your turnover. Other income reported on your return, such as employment or rental income, can also count. Check the current rules on GOV.UK.
Which loan plan am I on?
Your plan depends on where and when you studied. Your Student Loans Company account, or a letter from them, shows your plan type. If you are not sure, check with the Student Loans Company before you file, because the wrong plan can lead to the wrong amount.
Can I claim more expenses to reduce my student loan repayment?
Genuine allowable expenses reduce your profit, which can reduce what you repay. But you can only claim costs that are wholly and exclusively for the business. Claiming costs you cannot support is not a sensible way to lower a repayment.
Do I make student loan repayments if I am a limited company director?
Usually not through Self Assessment on company profit. Directors who take a salary have repayments collected through payroll, and dividends or other income reported on a personal tax return can also count. Speak to an accountant for your situation.
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Last reviewed: 3 October 2026.
This article is general information, not personal tax advice. Speak to a qualified accountant about your own circumstances before acting on it.