Student loan repayments for contractors
A Plan 2 director on £500 a day who takes a £12,570 salary and £73,056.45 of dividends repays £5,061 through Self Assessment, because once dividends pass £2,000 every pound of them counts. Through an umbrella the same work repays £5,899 a year through payroll.
Rates for the 2026/27 tax year. Checked 7 November 2026.
| Limited company | Umbrella | Sole trader | |
|---|---|---|---|
| Income counted | £85,626.45 | £94,935.00 | £55,000.00 |
| Threshold | £29,385 | £29,385 | £29,385 |
| Repayment a year | £5,061 | £5,899 | £2,305 |
| A month | £421.75 | £491.58 | £192.08 |
| Collected | 31 January, Self Assessment | Monthly through payroll | 31 January, Self Assessment |
| Dividends of £2,000 or less, none counted | £0 |
|---|---|
| Dividends of £73,056, all counted | £5,061 |
| What the dividends add | £5,061 |
Figures are for the whole year. Payroll works out the deduction each pay period on that period’s pay, so a month with a bonus can take more than one twelfth. Self Assessment settles the year in one payment on 31 January.
Worked example: Plan 2 at £500 a day
A director on Plan 2 bills £500 a day for 220 days, takes a £12,570 salary and pays out the rest as £73,056.45 of dividends. The salary is under the £29,385 threshold, so payroll takes nothing. The dividends are over £2,000, so all of them count on the tax return: £85,626.45 of income, £56,241.45 above the threshold, 9% of which is £5,061.73. The repayment is £5,061, due on 31 January 2028.
Had the dividends been £2,000 or less, the repayment would have been nothing, so the dividend level is the lever that matters most. The same £500 a day through an umbrella gives gross pay of £94,935 and £5,899 a year, about £491.58 a month through payroll. A sole trader with £55,000 of profit repays £2,305 on 31 January.
Why the result moves
The repayment follows the income that counts, not the money you keep. Through a company, corporation tax and employer National Insurance come off before any dividend is paid, so the income counted is lower than umbrella gross pay for the same day rate. Below £2,000 of dividends and interest the company route counts salary alone; one penny over, every pound of dividends counts. Adding a postgraduate loan takes another 6% above £21,000.
When this calculator is wrong for you
- You studied in Scotland but live and work in England. You stay on Plan 4 with its £33,795 threshold; pick Plan 4 here.
- You have an older mortgage-style loan from before 1998. Those are collected by the Student Loans Company directly and are not income-based.
- You are close to clearing the balance and have moved to direct debit, or you live abroad. Repayments are then agreed with the Student Loans Company, not worked out from these thresholds.
- You have savings interest as well as dividends. It counts towards the £2,000 too; add it to the dividends figure.
Questions people ask
Do dividends count towards my student loan?
Yes, through Self Assessment, but only when your dividends and savings interest together come to more than £2,000 in the tax year. Payroll never sees them; the extra is worked out on your tax return and paid on 31 January.
How does the £2,000 rule work?
It is all or nothing. At £2,000 of unearned income none of it counts. At £2,000.01 all of it counts, not just the part above £2,000. A director who takes £73,056 of dividends on a £12,570 salary repays on £85,626, not on £12,570.
Which plan am I on?
Your online account with the Student Loans Company shows it. As a rough guide, Plan 1 is for English and Welsh students who started before September 2012 and for Northern Ireland, Plan 2 for English and Welsh students who started from September 2012 to July 2023, Plan 4 for Scottish students and Plan 5 for English students who started from August 2023.
What is the difference between Plan 2 and Plan 5?
Both take 9% of income above the threshold. Plan 5 starts lower, at £25,000 against £29,385 for Plan 2 in 2026/27, and runs for 40 years after you become due to repay rather than 30.
What if I also have a postgraduate loan?
You repay both at once. The postgraduate loan takes 6% of income above £21,000 on top of 9% above your plan threshold, and each is worked out separately on the same income.
Why does my umbrella take a different amount each month?
Payroll uses a monthly threshold, one twelfth of the yearly figure, and looks only at that month’s pay. A month with more days worked takes more. If your pay for the whole year ends up under the threshold, ask the Student Loans Company for a refund.
Can I overpay if I have both payroll and Self Assessment?
Self Assessment works out the year’s total on all income that counts and takes off what payroll already deducted, so you should not pay twice. Check that the deductions on your P60 are entered on your return. Overpayments from uneven monthly pay are refunded by the Student Loans Company, not HMRC.
Does it stop after 30 years?
Plan 2, Plan 4 and postgraduate loans are written off 30 years after the April you were first due to repay. Plan 5 runs for 40 years. Plan 1 depends on when you took it out. Until then repayments continue whatever route you work through.
How this is worked out
Each route counts its income and takes the plan rate on the part above the plan threshold, floored at zero and rounded down to the whole pound for the year, with the postgraduate loan worked out the same way on its own threshold and rate. Payroll routes (umbrella pay and a director's salary) count only pay, worked out here on the annual figure. Self Assessment routes count salary and sole trader profit, plus dividends and interest when they add up to more than £2,000, in which case all of them count. What payroll has already taken is set against the Self Assessment total. Thresholds and rates are fromgov.uk, what you payand the unearned income rule fromHMRC's Self Assessment Manual, SAM121610.
Full formulas, rounding rules and test cases are on the methodology page. Every rate update is listed in the changelog.