How do I pay my student loan when contracting

Client Portal
Call us now
01707 871 610

Contractor FAQs: How do I pay my student loan when contracting?

Last updated on Thursday, March 24, 2016

Written by Dinah Makani

Question: “I have just finished studying for master’s degree and have now started contracting to maximise my pay, but I am not sure how I go about paying off my student loan as a contractor. Can you advise as I would like to set up a limited company but don’t know how this would affect my take home pay?”

Our answer:

Generally, individuals start making repayments on student loans as soon as their gross annual salary reaches a specific threshold.

The payroll method you choose to use for your contracting career will change the way your student loan repayments work. Your gross income calculations will be different as a person with a limited company as opposed to an umbrella company.

HM Revenue & Custom’s repayment plans:

There are now two plans for repaying your student loan depending on when you started studying at university. The plans are as follows:

Plan 1 is for:

  • English and Welsh students who started university before 1st September 2012
  • All Scottish and Northern Irish students

If you fall into this category, you would start repaying your loan when you earn over £17,335 per year. This amount tends to change on 6th April every year.

Plan 2 is for:

  • English and Welsh students who started university on or after 1st September 2012.

Under this plan, you would start repaying when you earn over £21,000 per year.

The repayment amount will be 9% of your total income over the limits of £17,335 or £21,000, depending on which of the above plans you fall under.

Limited company contractors:

A limited company contractor’s threshold is calculated based on a combination of low salary, dividends and other income such as rental income. These will be added together to create a gross total.

This will then be calculated in your Personal Tax Return, and you will need to tick the appropriate box on the Tax Return or advise your accountant of this if they will be taking care of your Personal Tax Return.

Estimate your repayment amount:

The best way to go about calculating your student loan repayment is by asking your accountant to make an estimation based on your expected annual income.

If you have a student loan, you can advise us of this and we would then help you make the estimation on how much money you would need to set aside each month in order to cover the amount of student loan you need to repay. This will allow you to set aside a part of your net income to pay this back when the final total is calculated based on your Personal Tax Return.

Our advice is to be proactive about your student loan repayment. As with any tax, being organised will allow you to be prepared for required repayments you need to make based on your Personal Tax Return.

How can we help?

At Churchill Knight & Associates Ltd, we have been helping contractors and freelancers since 1998, which makes us one of the most experienced contractor accountancy providers around.

If you would like more information about your student loan and your career as a contractor, or would like to submit a question for us to answer in our next blog, please email us on

If you are already a contractor looking for a payroll service that helps you with proactive advice and support about both the professional and personal aspects of your finances, then you should request a callback using the button below to receive more information about how we can meet your needs.


Share this content online