When thinking about take-home pay, many employees focus on income tax and National Insurance - but student loan repayments are often overlooked. For employers, student loans are usually straightforward to administer, yet having an awareness of the thresholds can be genuinely useful when discussing pay rises, bonuses, or overall remuneration.

Here's what you need to know for the 2026/27 tax year.

How Student Loan Repayments Work in Payroll

If an employee has an outstanding student loan, HMRC will notify you via a Start Notice. Once received, you must begin making deductions through payroll.

From an employer's perspective:

• Deductions are calculated automatically by your payroll software
• Your main responsibility is ensuring the employee is set up on the correct loan plan type
• Repayments stop automatically once HMRC tells you to stop

So operationally, it's simple. Where it becomes more valuable is understanding when repayments actually start.

Student Loan Repayment Thresholds for 2026/27

For the 2026/27 tax year, the repayment thresholds will be as follows (with the previous year shown in brackets):

• Plan 1 - £26,900 (£26,065)
• Plan 2 - £29,385 (£28,470)
• Plan 4 - £33,795 (£32,745)
• Plan 5 - £25,000 (first year in operation)
• Postgraduate Loan - £21,000 (unchanged)

Employees only start repaying once their income exceeds the relevant threshold.

Repayment Rates

Once earnings go above the threshold:

• 9% is deducted on income above the threshold for Plans 1, 2, 4 and 5
• 6% is deducted on income above the threshold for Postgraduate Loans

These deductions are taken in addition to tax and National Insurance, which is why they can have a noticeable impact on net pay.

Why This Matters for Employers

Even though student loan deductions are automated, understanding the thresholds can help you:

• Explain why a pay rise or bonus doesn't fully translate into higher take-home pay
• Support employees with salary planning conversations
• Avoid confusion or frustration when net pay changes unexpectedly

For employees close to a threshold, even a modest increase in pay can trigger repayments, reducing the perceived benefit of the increase.

Final Thoughts

Student loans may not be front of mind for many employees, but they can make a real difference to take-home pay. As an employer, a basic understanding of the thresholds and repayment rates puts you in a stronger position to communicate clearly and manage expectations.

If you'd like help reviewing payroll processes or supporting wider remuneration planning, Kings Oak Accountancy Services is here to help.