What a pay rise is worth with a student loan
Updated 12 November 2026 · Tax year 2026/27
Scope: how student loan repayments change the value of a pay rise in 2026/27. For the rise without a loan see what a £5,000 pay rise is worth.
A pay rise is taxed at your marginal rate: the income tax, National Insurance and anything else that is taken from the next pound you earn. If you repay a student loan, that "anything else" is 9% of every extra pound above your plan threshold, plus 6% more if you also repay a Postgraduate Loan. That changes how much of the rise reaches your bank account, and it is the main reason a graduate's payslip seems to grow more slowly than a colleague's on the same salary.
Every figure below comes from the js/tax.js engine that powers the Take-Home Lab calculator, using the 2026/27 rates for England, Wales and Northern Ireland unless a section says otherwise. It is an illustration only, not tax advice or a payslip.
The 2026/27 thresholds that matter
Student loan repayments are 9% of pay above the threshold for your undergraduate plan, and 6% above £21,000 for a Postgraduate Loan. HMRC's 2026/27 annual thresholds are:
| Loan | Annual threshold | Rate |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 4 (Scotland) | £33,795 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
Scroll sideways to see the whole table →
Once your salary is above your threshold both before and after the rise, the loan simply takes 9p of each extra pound. A basic-rate taxpayer already loses 28p in income tax and NI, so the rise is effectively taxed at 37%.
Worked example: £30,000 to £35,000 on Plan 2
Assumptions: 2026/27 · England, Wales or Northern Ireland · standard £12,570 allowance · no pension · no bonus · NI and loan modelled on the year.
- Take-home on £30,000 with Plan 2: £25,064.25
- Take-home on £35,000 with Plan 2: £28,214.25
- Extra income tax: 20% × £5,000 = £1,000.00
- Extra NI: 8% × £5,000 = £400.00
- Extra Plan 2 repayment: 9% × £5,000 = £450.00
- Rise kept: £3,150.00, or 63p of each £1 (£262.50 a month)
Without a loan the same rise is worth £3,600.00 (72p in each £1). The £450 difference is not lost: it reduces the balance of your loan. Whether that matters to you depends on whether you expect to repay the loan in full before it is written off, which this site does not model.
Worked example: Plan 2 and a Postgraduate Loan together
If you repay an undergraduate plan and a Postgraduate Loan at the same time, both are deducted. The same £30,000 to £35,000 rise then costs 9% for Plan 2 and 6% for the Postgraduate Loan:
- Take-home on £30,000: £24,524.25; on £35,000: £27,374.25
- Extra tax and NI: £1,400.00
- Extra Plan 2: £450.00; extra Postgraduate Loan: £300.00
- Rise kept: £2,850.00, or 57p of each £1
The calculator now handles both loans at once: pick your plan, then tick "I also repay a Postgraduate Loan". The Postgraduate Loan guide explains how the two deductions sit side by side.
Worked example: a rise that crosses your threshold
A rise from £28,000 to £32,000 on Plan 2 starts below the £29,385 threshold and ends above it. Only the part above £29,385 is caught: 9% × (£32,000 − £29,385) = £235.35. With tax and NI of £1,120.00 on the £4,000 rise, you keep £2,644.65 (66p of each £1). Take-home moves from £23,679.60 to £26,324.25.
The first pay rise after graduation is often like this. It can feel as if the rise "triggered" the loan, but the repayment is only on the slice above the threshold, so the rise always leaves you better off.
Worked example: higher rate and the £100,000 taper
- £55,000 to £60,000, Plan 2: tax £2,000.00 (40%), NI £100.00 (2%), loan £450.00. You keep £2,450.00, 49p in each £1. Without the loan it would be £2,900.00.
- £105,000 to £110,000, Plan 2: the personal allowance taper makes the tax rate 60%, so tax is £3,000.00, NI £100.00 and the loan £450.00. You keep £1,450.00, only 29p in each £1.
In the taper band, salary sacrifice into a pension is the usual way to keep more of a rise, because it reduces the pay that tax, NI and the loan are worked out on. See salary sacrifice versus net pay and £100,000 after tax.
Does the plan make a difference?
Above the threshold, no: Plans 1, 2, 4 and 5 all take 9% of the extra pay. On a £30,000 to £35,000 rise, Plan 1, Plan 2 and Plan 5 each take £450.00, so the rise is worth £3,150.00 in every case. What differs is the starting point: on £35,000, Plan 5 already takes £900.00 a year, Plan 1 £729.00 and Plan 2 £505.35.
Plan 4 in Scotland has the highest threshold, £33,795. A £30,000 to £35,000 rise on Scottish tax bands with Plan 4 adds £1,050.00 of tax (21%), £400.00 of NI and only £108.45 of loan, so you keep £3,441.55. See the Plan 4 guide.
How the rise shows on a payslip
Student loan deductions are worked out each pay period against the monthly or weekly threshold, not on the year. If your rise is backdated and paid as a lump sum, that month's pay is higher and the loan deduction is higher too. Over a full year at the new salary the total will be close to the figures above. The payslip notes on the calculator page explain this in more detail, and the bonus guide covers one-off payments.
Edge cases
- Two undergraduate plans: if you have, say, Plan 1 and Plan 2 loans, you pay a single 9% above the lower threshold, not 18% (see GOV.UK, repaying your student loan: what you pay).
- Self-employed income or savings: repayments on income outside PAYE are collected through Self Assessment. This site only models a salary.
- Pension contributions: a salary-sacrifice pension reduces the pay the loan is worked out on. A net pay pension does not.
Frequently asked questions
Does a student loan make a pay rise worth less?
In your bank account, yes. Above your plan threshold, 9p of each extra pound goes to the loan, so a basic-rate rise is worth 63p in each £1 instead of 72p. The money reduces your loan balance rather than being lost.
Can a pay rise leave me worse off because of my student loan?
No. Repayments are only taken on pay above the threshold, at 9% (plus 6% for a Postgraduate Loan), so you always keep part of each extra pound.
How much of a £5,000 rise do I keep with Plan 2?
From £30,000 to £35,000 in England, Wales or Northern Ireland, £3,150.00 a year, or £262.50 a month. With a Postgraduate Loan as well, £2,850.00.
Do I pay both my undergraduate loan and my Postgraduate Loan?
Yes. If you repay an undergraduate plan and a Postgraduate Loan, both are deducted: 9% above your plan threshold and 6% above £21,000.
Will salary sacrifice reduce my student loan repayments?
Yes. Salary sacrifice lowers the pay that the loan is worked out on. A net pay pension lowers taxable pay only, so the loan stays the same.
Try your own rise in the calculator
Sources (checked 12 November 2026): GOV.UK Repaying your student loan: what you pay; HMRC rates and thresholds for employers 2026 to 2027; GOV.UK special rules for student loans. Figures from the Take-Home Lab calculator engine for 2026/27. Illustrative only — not tax advice. Rodway Labs · hello@takehomelab.co.uk.