The plan-by-plan summary
UK student loans are repaid through PAYE based on which plan you're on. Each plan has its own threshold and rate:
| Plan | Threshold (annual, 2026/27) | Rate | Who has it |
|---|---|---|---|
| Plan 1 | £26,065 | 9% | Pre-2012 E&W; pre-2017 Scotland/NI; some legacy SAAS Scotland |
| Plan 2 | £28,470 | 9% | 2012–2023 starters in E&W |
| Plan 4 | £32,745 | 9% | 2017+ starters in Scotland |
| Plan 5 | £25,000 | 9% | 2023+ starters in E&W |
| Postgraduate Loan (PGL) | £21,000 | 6% | Master's / PhD; runs alongside any undergrad plan |
The repayment is calculated per pay period, not annually. Above the period-threshold, you pay 9% (or 6% for PGL) on every pound.
Which plan are you on?
Match by start year + location:
| Started uni in... | Where? | Likely plan |
|---|---|---|
| 1998–2011 | England, Wales, NI | Plan 1 |
| 2012–2023 | England, Wales | Plan 2 |
| 2023 onward | England, Wales | Plan 5 |
| Pre-2017 | Scotland | Plan 1 |
| 2017 onward | Scotland | Plan 4 |
| Any time | Northern Ireland | Plan 1 |
| Postgraduate from 2016 | Any (E&W mainly) | PGL |
Your Student Loans Company account (online.slc.co.uk) shows which plan(s) you have. If you have multiple, all apply.
[Read plan-by-plan details:]( - Plan 1 → - Plan 2 → - Plan 4 → (Scotland) - Plan 5 → - Postgraduate Loan →
How the deduction works mechanically
PAYE looks at your earnings each pay period and asks two questions:
- Are you over the plan threshold for this period?
- If yes, what's the excess and the rate?
The annual threshold is divided into period thresholds:
| Pay frequency | Plan 2 threshold per period |
|---|---|
| Monthly (12) | £28,470 / 12 = £2,372.50 |
| Weekly (52) | £28,470 / 52 = £547.50 |
| 4-weekly (13) | £28,470 / 13 = £2,190 |
Each period, your earnings above the period threshold attract the 9% (or 6%) rate.
The deduction is rounded DOWN to the nearest pound per pay period before being deducted from your gross.
Worked example — Plan 2 on £35,000
Annual: - Threshold: £28,470 - Above threshold: £6,530 - 9% deduction: £588 per year
Monthly: - Monthly gross: £2,917 - Monthly threshold: £2,372.50 - Above monthly threshold: £544.50 - 9% × £544.50 = £49 monthly deduction (HMRC rounds down) - Annualised: £49 × 12 = £588 (matches the annual figure)
Worked example — Plan 2 + PGL on £40,000
Plan 2: - Above £28,470 = £11,530 × 9% = £1,038 per year
PGL: - Above £21,000 = £19,000 × 6% = £1,140 per year
Combined annual student loan deduction: £2,178
A surprisingly large slice — about 5.4% of gross. Combined with Income Tax + NI, total deductions on £40,000 approach 35%.
Multi-plan rules
If you have multiple undergraduate plans (e.g. you did two degrees crossing the rule changes), HMRC applies the lower threshold and you pay 9% above it. The Student Loans Company splits the deduction between your plans behind the scenes.
Example: Plan 1 + Plan 2 on £35,000: - Lower threshold: min(£26,065, £28,470) = £26,065 - Above threshold: £35,000 − £26,065 = £8,935 - 9% × £8,935 = £804 deduction
You don't pay 18%. The PGL is always additive on top of any undergrad plan.
What income counts toward the threshold
Threshold-relevant income includes: - Gross salary - Bonuses - Overtime - Most employment income
What REDUCES threshold-relevant income: - Salary sacrifice pension — directly reduces gross before student loan calculation - Net pay arrangement pension — same effect, different mechanism - (Both work because the contribution leaves before student loan is calculated)
What does NOT reduce threshold-relevant income: - Relief-at-source pension — comes out of net pay after student loan is calculated - Benefits in kind (not counted toward threshold either way) - Charitable giving / Gift Aid
This is the largest optimisation lever for student-loan borrowers near the threshold.
The salary sacrifice optimisation
For someone earning just above their plan threshold, pension sacrifice can dramatically reduce or eliminate the student loan deduction:
Example: £30,000 salary, Plan 2 borrower
Without sacrifice: - Above £28,470 = £1,530 × 9% = £138 student loan/year - Plus Income Tax and NI
With 6% salary sacrifice (£1,800 to pension): - Gross-equivalent for threshold: £30,000 − £1,800 = £28,200 - Below £28,470 threshold → £0 student loan - Pension contribution: £1,800 - Net cost to take-home: roughly £1,071 (after Income Tax + NI saved)
The £1,800 sacrifice costs £1,071 of take-home, puts £1,800 into pension, AND eliminates £138 of student loan. Effective discount on pension: ~38%.
For borrowers anywhere between £25k–£35k income, this is consistently the most powerful single move. Read more about salary sacrifice →
When loans are written off
Each plan has a write-off date:
| Plan | Written off after... |
|---|---|
| Plan 1 (pre-2006 starters) | Earliest of: age 65, 25 years after first becoming repayable |
| Plan 1 (post-2006 starters) | 25 years after first becoming repayable |
| Plan 2 | 30 years after first becoming repayable |
| Plan 4 | 30 years after first becoming repayable |
| Plan 5 | 40 years after first becoming repayable |
| PGL | 30 years after first becoming repayable |
"First becoming repayable" is typically the April after graduation. No interest, no penalty, no credit-record impact — the balance is simply written off.
Read more about write-off rules →
Bonus months and PILON
Because the calculation is per pay period:
- A bonus paid in one month can push that month's earnings well above the period threshold → much higher student loan deduction in that month
- A redundancy PILON paid as a single lump sum can trigger a large one-off student loan deduction
- Subsequent months return to normal — there's no end-of-year reconciliation
For a £50,000-earning Plan 2 borrower receiving a £20,000 PILON in one month: - That month's earnings: £20,000 (PILON) + £4,167 (normal salary) = £24,167 - Period threshold: £2,372.50 - Above-threshold: £21,794 - Student loan deduction that month: £1,961
Compared to steady-state (£162/month), this is a 12× spike. Worth knowing if you're modelling a large bonus or termination payment.
Self-employed: Self Assessment, not PAYE
If you're self-employed, student loan deductions are calculated through Self Assessment based on your annual self-employment income (and other income). Not PAYE-period-by-period. The thresholds and rates are the same; the mechanism is annual.
This page focuses on PAYE-employed borrowers; the self-employed mechanism is similar but settled annually through your tax return.
In short
UK student loans repay through PAYE based on which plan you're on (1, 2, 4, 5, or PGL). The rate is 9% above the plan threshold (6% for PGL), calculated per pay period. Multiple undergrad plans use the lower threshold; PGL is always additive. Salary sacrifice into pension is the largest single optimisation lever. Loans write off after 25–40 years depending on plan. Spoke articles linked above go deeper on each plan and rule. The take-home calculator → models the deduction alongside Income Tax and NI for any salary.