Student Loan Thresholds and Rates: An Employer’s Guide for the 2026/27 Tax Year

As we enter the 2026/27 tax year, employers and payroll managers must ensure their payroll systems are fully aligned with the latest statutory updates. Effective from 6 April 2026, HM Revenue and Customs (HMRC) has implemented new repayment thresholds for both undergraduate student loans and postgraduate loans.

Crucially, this tax year marks the official introduction of Plan 5 repayments into active payroll processing. Maintaining compliance is essential to ensure precise calculations are deducted from employee pay packets and to avoid HMRC penalties.

Here is an essential guide to the new thresholds, deduction rates, and key employer responsibilities.

Student Loan Thresholds from 6 April 2026

The income threshold dictates the point at which an employee must begin repaying their loan. Repayments are calculated based on gross earnings before tax and National Insurance, but after any applicable pension contributions.

The updated annual thresholds across all five undergraduate plans and the postgraduate loan scheme—along with their monthly and weekly equivalents—are as follows:

Loan / Plan Type	Annual Threshold	Monthly Threshold	Weekly Threshold
Plan 1	£26,900	£2,241.66	£517.30
Plan 2	£29,385	£2,448.75	£565.09
Plan 4 (Scottish)	£33,795	£2,816.25	£649.90
Plan 5 (New)	£25,000	£2,083.33	£480.76
Postgraduate Loan	£21,000	£1,750.00	£403.84

Deduction Rates Remaining Steady

While the income thresholds have shifted, the actual percentages deducted from earnings remain unchanged for this tax year:

• Plans 1, 2, 4, and 5: The repayment rate remains at 9% for any earnings exceeding the respective plan thresholds.
• Postgraduate Loans: The repayment rate remains at 6% for any earnings exceeding the postgraduate threshold.

Payroll Note: If an employee has both a standard undergraduate student loan and a postgraduate loan, deductions must be calculated independently for both schemes. For high-earning employees who clear both thresholds, this can result in a combined deduction rate of up to 15%.

Understanding the Plan Types: A Quick Refresher

The specific plan type operated by an employee depends largely on when they studied and which UK funding body they applied to:

• Plan 1: Borrowers who started higher education courses before 1 September 2012, or any borrower funded via Student Finance Northern Ireland.
• Plan 2: Borrowers who started higher education courses between 1 September 2012 and 31 July 2023 via Student Finance England or Student Finance Wales.
• Plan 4: Borrowers who received financial support via the Student Awards Agency Scotland (SAAS).
• Plan 5 (The New Addition): Applies to English borrowers who started undergraduate courses, Postgraduate Certificates of Education (PGCE), or Advanced Learner Loans on or after 1 August 2023. April 2026 is the very first time repayments for Plan 5 become active through PAYE.

Employer Responsibilities & Action Points

HMRC’s official student loan and postgraduate loan repayment guidance for employers has been fully updated to reflect these 2026 adjustments. To ensure flawless compliance, payroll teams should focus on the following:

1. Monitor Start Notices: HMRC will issue SL1 start notices for student loans (specifying Plan 1, 2, 4, or 5) and PGL1 start notices for postgraduate loans. These must be applied to your payroll software promptly.
2. Utilize the Starter Checklist: When onboarding new hires without a P45, ensure they complete the updated Starter Checklist. If an employee advises they have an active student loan but does not know the plan type, statutory rules dictate that the employer must default to the plan type with the lowest recovery threshold. For the 2026/27 tax year, this defaults to Plan 5 (£25,000).
3. Software and Manual Overrides: Ensure your commercial payroll software or HMRC Basic PAYE Tools are fully updated to the 2026/27 specifications. If your team ever needs to process manual calculations, you must refer to the updated SL3 Student and Postgraduate Loan deduction tables.
4. Await Official Stop Notices: Do not cease making deductions until you receive an official SL2 (student loan) or PGL2 (postgraduate loan) stop notice directly from HMRC.

Seamless Transitions with Hewitt’s Payroll

Managing multi-tiered student loan plans, cross-calculating combined thresholds, and keeping pace with statutory updates can add significant administrative strain to your internal finance or HR departments.

At Hewitt’s Payroll, we specialize in end-to-end PAYE, auto-enrolment, and statutory deduction compliance. Let us manage the stress of the 2026/27 tax year adjustments so you can stay focused on driving your business forward.

Contact the expert team at Hewitt’s Payroll today to discover how we can optimize your payroll operations.