How to calculate student loan repayments as a limited company director

Many people have outstanding student loans when they start contracting, but how do you calculate and make repayments if you work through your own limited company?

If you’re a traditional employee, your student loan repayments are usually deducted automatically from your salary via PAYE.

If you work through your own company, repayments may also be deducted through your company payroll if your salary is high enough. You then pay any additional amount due via Self Assessment.

Student loan basics for limited company directors

As a limited company owner, your student loan repayments may be calculated using more than just your salary.

Your Self Assessment calculation can include your salary, dividends and other income, subject to the student loan calculation rules.

This is particularly relevant to contractors who take a relatively low salary and the rest of their income as dividends.

There is one useful technical point here. Unearned income, including dividends, interest and property income, is normally ignored for student loan purposes if the total is £2,000 or less.

If your unearned income is more than £2,000, however, you include the full amount, not just the amount above £2,000.

You can read more about how dividends are taxed here.

Using a limited company doesn’t exempt you from making student loan repayments, as you still have to repay your loans if your income goes above the relevant threshold.

Student loan repayments are based on income received during the tax year, so distributing a sizeable dividend in one year can increase the amount you have to repay.

If your salary is below the PAYE repayment threshold, you may have little or nothing taken during the year. A larger amount can then become due through Self Assessment once your dividend income is included.

If that’s likely, it always makes sense to put money aside in advance (the same is true for any future tax liabilities!).

You can find out which plan you’re on by signing into your online student loan account.

Student loan repayment plans – Plans 1, 2, 4, 5 and Postgraduate

There are several student loan repayment plans. Which one you’re on depends mainly on when and where you studied:

1. Plan 1: applies to various older loans, including many borrowers from England, Wales and Northern Ireland.
2. Plan 2: mainly applies to borrowers who took out eligible loans in England or Wales from September 2012.
3. Plan 4: mainly applies to Scottish borrowers.
4. Plan 5: applies to eligible borrowers in England who started relevant courses from August 2023.
5. Postgraduate Loan: applies to qualifying Master’s and Doctoral loans.

And, to make things even more confusing, the thresholds differ by plan.

Student loan thresholds for 2026/27

For the 2026/27 tax year, the annual repayment thresholds are:

• Plan 1: £26,900 — 9% of income above the threshold.
• Plan 2: £29,385 — 9% of income above the threshold.
• Plan 4: £33,795 — 9% of income above the threshold.
• Plan 5: £25,000 — 9% of income above the threshold.
• Postgraduate Loan: £21,000 — 6% of income above the threshold.

These thresholds normally change over time, so check the latest student loan repayment figures on GOV.UK.

Interest rates also change, so rather than relying on a fixed percentage, check the current rate for your particular plan on GOV.UK.

Key differences if you’re on Plan 5

Plan 5 applies to eligible borrowers in England who started relevant courses from 1st August 2023.

Some of the main features are:

1. The repayment threshold is £25,000 in 2026/27.
2. The standard repayment rate is 9% above the threshold.
3. The repayment period can run for up to 40 years before any remaining balance is written off.
4. Interest is linked to RPI rather than the Plan 2 RPI-plus arrangement.

Plan 5 repayments started in April 2026 for the first borrowers who became liable to repay.

How to calculate your student loan repayments

HMRC calculates your student loan repayment from the figures supplied in your Self Assessment return.

For example, if you’re on Plan 5 and your income for student loan purposes is £40,000:

1. Income: £40,000
2. Plan 5 threshold: £25,000
3. Amount above the threshold: £15,000
4. Repayment: 9% of £15,000 = £1,350

If you’ve already made repayments through PAYE during the tax year in question, these are taken into account when HMRC works out the remaining amount due.

Repayment via Self Assessment

If you complete a Self Assessment return, your student loan repayment is dealt with as part of the return.

The usual deadline for filing online and paying what you owe is 31 January following the end of the tax year.

For limited company directors, this can mean paying part of the student loan alongside the rest of the Self Assessment bill, rather than having it all taken month by month through PAYE.

On the return, make sure you:

1. Include all relevant income for the year.
2. Say that you have a student or postgraduate loan and give the correct plan where required.
3. Include any student loan repayments already taken through PAYE.

Any PAYE repayments already made are taken off the final figure.

Multiple loans and plans

If you have more than one undergraduate repayment plan, this does not normally mean you pay 9% twice.

Where you have more than one Plan 1, 2, 4 or 5 loan, repayments are generally based on 9% above the lowest applicable threshold, with the payment then allocated between the loans.

If you also have a Postgraduate Loan, the calculation is different.

You can repay 6% above the postgraduate threshold plus 9% above the relevant undergraduate threshold.

This means your repayments can overlap if you have both an undergraduate and postgraduate loan.

What if you think your repayment is wrong?

If your student loan figure looks wrong, check the details on your return first – particularly the repayment plan and any amounts already taken through PAYE.

If it still doesn’t add up, speak to your accountant and, if necessary, to HMRC or the Student Loans Company before changing anything.

You can also claim back overpayments in some cases, including where deductions were taken through PAYE but your income for the year ended up below the repayment threshold.

Voluntary payments

You can make additional student loan repayments at any time.

Whether this is worthwhile depends on your circumstances, including the size of your outstanding balance, interest rate and how likely you are to repay the loan in full before it is written off.

A voluntary payment reduces the outstanding balance, but it does not reduce the compulsory repayment calculated from your income for that year.

This is particularly important for contractors considering making a large one-off payment shortly before completing their Self Assessment return.

Some useful resources

1. GOV.UK Student Loan Repayment: https://www.gov.uk/repaying-your-student-loan
2. Student Loans Company: https://www.slc.co.uk/
3. Current repayment thresholds and rates: https://www.gov.uk/repaying-your-student-loan/what-you-pay