How student loan repayments affect salary

GOV.UK states that student-loan repayments are based on income, not on the outstanding balance. Once earnings exceed the relevant plan threshold for the pay period, payroll normally deducts a percentage of the earnings above that threshold. The percentage is 9% for Plans 1, 2, 4 and 5 and 6% for a Postgraduate Loan.

This means two graduates on the same salary can have different take-home pay if they are on different plans. It also means the loan deduction should not be treated like a fixed monthly direct debit: it rises and falls with earnings above the plan threshold.

The annual thresholds for 2026/27 are £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4, £25,000 for Plan 5 and £21,000 for Postgraduate Loans. Payroll also uses weekly or monthly thresholds depending on pay frequency, so a high-earning month can create a deduction even when annual income later ends up below the annual threshold.

GOV.UK says you may be able to request a refund at the end of the tax year if your annual income was below the relevant yearly threshold even though deductions were taken in individual pay periods.

Student-loan repayment income includes earnings such as bonuses and overtime. If a bonus pushes pay above the monthly or weekly threshold, the repayment in that period can jump. That does not mean the payroll system has suddenly changed your plan; it is responding to the higher earnings in that period.

When comparing a bonus-heavy offer with a fixed salary, model the annual position but also remember that the timing of payroll deductions can make individual months look more volatile.

A £5,000 raise is not worth the same amount in cash to a borrower and a non-borrower if the additional earnings sit above the repayment threshold. TaxDecod’s salary pages and comparison tool can show the estimated deduction alongside Income Tax and NI so the decision is based on the amount that actually reaches net pay.