UK student loans are income-contingent: you repay a percentage of earnings above a threshold, collected through payroll like tax. They are not Income Tax — they do not reduce your personal allowance, and the balance can eventually be written off. But on your payslip they feel like a fourth deduction after tax, NI, and pension. That is why “£50k” never feels like fifty.
How repayments work
For undergraduate plans, you pay 9% on earnings above your plan’s annual threshold. Postgraduate loans use 6% above a separate threshold. Repayments apply to gross pay before tax in most PAYE setups — the Student Loans Company takes its slice from what you earn, not what is left after HMRC.
If you have both an undergraduate and postgraduate loan, both can run at once (9% + 6% on the relevant slices). Self-employed borrowers report through Self Assessment instead of PAYE.
2025/26 thresholds by plan
Thresholds usually rise with inflation each April. For 6 April 2025 to 5 April 2026:
- Plan 1 (pre-2012 England/Wales, Northern Ireland) — repay above £25,000/year
- Plan 2 (2012+ England/Wales) — repay above £29,385/year
- Plan 4 (Scotland) — repay above £25,000/year
- Plan 5 (2023+ England) — repay above £25,000/year (longer write-off period than Plan 2)
- Postgraduate loan — 6% above £21,000/year
Check your exact plan on the gov.uk student loan hub — the plan letter on your payslip is the one that matters.
Worked example: £50,000 salary, Plan 2
England/Wales/NI, 2025/26, no pension:
Annual maths: earnings above threshold = £50,000 − £29,385 = £20,615. Repayment = 9% × £20,615 = £1,855/year (~£155/month). That is on top of roughly £7,486 Income Tax and £2,994 employee NI.
Plan 1 vs Plan 2 at £50k
Plan 1’s lower threshold means a bigger repayment at the same salary:
- Plan 1: 9% × (£50,000 − £25,000) = £2,250/year (~£188/month)
- Plan 2: 9% × (£50,000 − £29,385) = £1,855/year (~£155/month)
Plan 5 also uses a £25,000 threshold like Plan 1, but has a longer repayment window before write-off (40 years vs 30 for Plan 2). The monthly deduction at £50k is similar to Plan 1; the long-term cost profile differs.
Postgraduate loan stacking
A graduate with a Plan 2 undergrad loan and a postgraduate loan on £55,000 salary pays:
- Plan 2: 9% × (£55,000 − £29,385) = £2,305
- Postgrad: 6% × (£55,000 − £21,000) = £2,040
- Combined loan bill: £4,345/year (~£362/month) before you have bought lunch
TaxBite can model a single plan at a time — run twice if you need both, or use the higher combined figure mentally for job-offer sanity checks.
Scotland: Plan 4
Scottish borrowers on Plan 4 repay 9% above £25,000. Income Tax bands in Scotland are different (see our Scotland vs England guide), but student loan thresholds for Plan 4 align with Plan 1/5 style levels, not Plan 2’s higher threshold.
At £50,000 in Scotland with Plan 4, loan repayment matches Plan 1 maths (~£188/month), while Income Tax may be higher than England at the same gross.
Pay rises, bonuses, and marginal loan rate
Student loan repayments are effectively a 9% (or 6%) marginal charge on earnings above the threshold. A £5,000 pay rise from £48k to £53k on Plan 2 adds 9% × £5,000 = £450/year loan repayment on top of tax and NI — unless part of the rise stays below the threshold.
That is why our pay rise guide recommends comparing take-home, not gross. A promotion looks smaller once tax, NI, and SLC all take a swing.
What student loans are not
- Not a normal debt — repayments scale with income; write-off applies after 30–40 years depending on plan
- Not deductible from Income Tax — unlike pension contributions
- Not always worth overpaying — depends on balance, interest rate, and career trajectory (financial advice territory; we just model payslips)
- Not frozen forever — thresholds and interest rules change; check SLC annually
Interest and write-off — payslip vs lifetime cost
Student loan interest rates vary by plan and are often linked to RPI or a fixed rate plus inflation. Your payslip only shows the repayment, not interest accrual. Loans are typically written off 30 years after the April following graduation (Plan 2) or 40 years (Plan 5) if not fully repaid — many borrowers will not clear the balance before write-off. That is a policy choice, not a personal failure. TaxBite models cash leaving your pay each month; lifetime cost analysis is a separate spreadsheet.
When to use TaxBite
Pick your plan under Advanced Features. The Tax Bite pie and monthly net update instantly — useful for job offers, remote-work moves, and “is this raise worth it?” debates. Pair with salary tables for round-number browsing.
Open £50k + Plan 2 →Pay rise take-home → · Bonus tax →
Estimates only — not financial advice. SLC thresholds and payroll timing can differ slightly. Official info: gov.uk.