Is student loan repayments
tax deductible?

No. Student loan repayments are not a business expense. If you are self-employed, they are worked out on your Self Assessment return and paid with your tax, at 9% of income above your plan's threshold, or 6% for postgraduate loans (GOV.UK).

Many younger sole traders have student loans, and repayments can be a surprise on their first tax bill. The repayments are not an expense; they are worked out on your return from your total income above your plan's threshold. Every allowable expense reduces your profit, which reduces the repayment too.

Is student loan repayments tax deductible?

The HMRC rule

Money taken from the business for personal use, savings and investments, loan capital repayments and your own tax are not expenses. Some have their own relief elsewhere on the tax return. The rule comes from Repaying your student loan, Expenses if you’re self-employed.

GOV.UK explains that if you are self-employed, or need to complete a Self Assessment return for another reason, you repay your student loan through Self Assessment, and that you repay a percentage of your income over the threshold for your plan (repaying your student loan). Repayments are personal, not business expenses (expenses overview).

When you can claim it

• Reduce repayments by claiming all allowable expenses.
• Make voluntary repayments at any time.
• Ask for a refund if you overpaid.
• Check your plan type and threshold online.

When you cannot

• Deduct repayments from business profit.
• Treat voluntary repayments as an expense.
• Avoid Self Assessment repayments by not declaring income.
• Deduct a partner’s repayments.

What to claim instead

Budget for student loan repayments alongside your tax. They are due with your balancing payment on 31 January, and they are not included in payments on account, so the first year's bill can be larger than expected.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is not a cost of running the business at all, so the accounting basis makes no difference: it never goes in your expenses, although it may have a relief of its own elsewhere on the return.
4. Is there a specific rule? For student loan repayments, the deciding rule is payments that are not business costs: money taken from the business for personal use, savings and investments, loan capital repayments and your own tax are not expenses. Some have their own relief elsewhere on the tax return.

Worked example: a Plan 2 designer

A graphic designer with a Plan 2 loan has £38,000 of profit and a Plan 2 threshold of about £29,400. She repays 9% of the £8,600 above it, about £774, through her return. Claiming another £1,000 of allowable expenses would cut her repayment by £90 as well as her tax.

How repayments are calculated

Repayments are worked out on your total income for the year, including trading profit, above your plan's threshold. Plans 1, 2, 4 and 5 are repaid at 9%, and postgraduate loans at 6%. Thresholds change each April, so check the current figures for your plan.

Expenses reduce repayments

Because repayments depend on your profit, every allowable expense reduces them. For a basic-rate sole trader repaying a loan, each £1 of allowable expense saves about 35p: 20% Income Tax, 6% Class 4 and 9% student loan.

Payments on account

Student loan repayments are not included in payments on account, so they are all due on 31 January after the end of the tax year. Set money aside through the year.

Employees and the self-employed

If you also have a job, your employer deducts repayments through payroll, and the rest is worked out on your return. You will not repay twice: the return takes account of what was deducted.

Paying from the business account

Sole traders often pay personal costs from the account they use for the business. That is allowed, but the payment is drawings, not an expense. Record it that way so it does not end up in your expense totals. If your accounts do include it, the full self-employment pages have a disallowable column, box 45 for other expenses, where the same amount is added back.

Checking your plan

Your plan type depends on when and where you studied. Plan 1 covers older English and Welsh loans and Northern Ireland loans, Plan 2 English and Welsh loans from 2012, Plan 4 Scottish loans, and Plan 5 English loans from August 2023. You can have more than one plan. Your online student loan account shows which apply.

Paying off early

You can make voluntary repayments at any time without penalty. Whether that makes sense depends on your plan, interest rate and whether the loan is likely to be written off before you repay it. Voluntary repayments are personal and never a business expense.

Where it goes

Student loan repayments go on the student loan section of your return, not the business pages.

Where it goes on your return and in MTD

It is not an allowable expense, so it does not reduce your profit. Where your bookkeeping shows it as a business payment, record it as drawings, or include it and add it back as a disallowable expense on the full self-employment pages.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

The accounting basis changes when a cost counts. On the cash basis, the default for sole traders since 2024/25, it counts when you pay it; on traditional accounting, when you incur it, with things you keep claimed through capital allowances.

How much an allowable cost saves

An allowable expense does not come back to you in full: it reduces your profit, so it saves tax at your marginal rate. For a sole trader in England, Wales or Northern Ireland that is 26p in the pound at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate. The sole trader tax calculator works out the figure for your own profit.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

You do not need business records for personal costs. If a personal payment was made from the business account, record it as drawings so it is excluded from your expenses. Keep policy documents, statements and receipts in your personal records, because some of them matter for your tax return in other ways.

If Making Tax Digital for Income Tax applies to you (qualifying income over £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028), the records must be digital, and each quarter's costs go into a quarterly update. Check your date with the MTD requirement checker.

Common mistakes

• Deducting repayments as an expense.
• Not budgeting for repayments outside payments on account.
• Forgetting to tick the student loan box on the return.

Related expenses

This item sits in the other business expenses category, alongside art and collectibles, care home fees, charity donations, clothing and workwear, cryptocurrency, fines and penalties, funeral costs and furniture. The A to Z of expenses answers the same question for every other cost.

If you record your costs in TapTax, each one lands in the HMRC category it belongs to, with its receipt attached, so your quarterly updates and year-end return use the same figures.