Student loans and the tax traps: the 51%–71% graduate rates

Student loan repayments work like a tax: 9% of everything you earn above your plan’s threshold (6% for postgraduate loans), taken through payroll. The 2026/27 thresholds:

Plan	Who	Threshold	Rate
Plan 1	England/Wales pre-2012, all NI loans	£26,900	9%
Plan 2	England/Wales, 2012–2023	£29,385	9%
Plan 4	All Scottish loans	£33,795	9%
Plan 5	England, from Aug 2023	£25,000	9%
Postgraduate	England/Wales master’s & doctoral	£21,000	6%

Undergraduate and postgraduate loans stack: a graduate repaying both hands over 15% of every pound above £26,900 (once both thresholds are passed) before income tax and NI are counted. Not sure which plan you’re on? The calculator’s “which plan am I on?” note covers all four nations.

How the stack builds

For a Plan 2 graduate in England:

£35k: 20% tax + 8% NI + 9% loan = 37%
£55k: 40% tax + 2% NI + 9% loan = 51%
£60k–£80k with two kids: add ~11.7% for the child benefit charge → ~63%
£100k–£125k: add the personal allowance taper → 71%, and crossing £100k with children also fires the childcare cliff.

Scottish graduates run the same stack through higher bands — 42% starts at £43,662 — so a Plan 4 graduate hits 53% there and ~78.5% in the taper zone.

The detail that surprises people: pension type matters

Loan repayments are calculated on the same earnings basis as National Insurance. That means:

Salary sacrifice reduces your student loan repayments — sacrificed pay never enters the calculation.
Net-pay and SIPP (relief-at-source) contributions don’t — they reduce income tax and adjusted net income, but your loan keeps being charged on the full salary.

For a graduate weighing up pension routes, that 9% is a real gap: at £60,000, a £10,000 salary sacrifice saves £900 a year of loan repayments that a £10,000 SIPP contribution would not. Whether paying less loan is good for you long-term depends on whether you’ll ever clear the balance before write-off — forecast repayers should think twice; likely non-repayers should sacrifice freely.

The calculator below is preloaded with a Plan 2 graduate on £60,000 — switch the pension type between salary sacrifice and SIPP and watch the student loan line change.

Try your own numbers

About you

Where you liveSets tax bands and childcare rulesGross salaryAnnual pay before tax or any deductions — the headline figure on your contract, not what lands in your bankTaxable benefits in kindP11D value: company car, private medical… Counts towards the £100k tests. 0 if noneVariable bonus (maximum)The most you might get this year if targets are hit. 0 if nonePension contributionGross annual amount landing in the pensionHow it's paidAlso saves NI and student loan — the cheapest routeStudent loanPostgraduate loan

Your household

Partner with incomeChildrenAnnual childcare spendWith registered providersValue of 30 free hoursWhat you'd pay without them

Which student loan plan am I on?

It depends on where you lived when you took the loan out, and when your course started:

Northern Ireland — always Plan 1, whatever the year.
Scotland — always Plan 4 (loans applied for through SAAS).
England — Plan 1 before Sept 2012, Plan 2 from 2012 to July 2023, Plan 5 from Aug 2023.
Wales — Plan 1 before Sept 2012, Plan 2 after (Wales doesn't use Plan 5).
Postgraduate loan — English or Welsh master's/doctoral loans only; it repays alongside your main plan. Scottish and NI postgrad loans repay through Plan 4 / Plan 1 instead.

Still unsure? Your repayment plan is shown when you sign in to your student loan account on gov.uk.

Kept value = take-home pay + child benefit kept + childcare support with no pension contribution, for your household in England, 2026/27 tax year. Contributing moves you left; salary sacrifice lands exactly on the curve, net-pay and relief-at-source land slightly off it (NI and student loans don't fall).

Per year	No pension
Take-home pay	£42,602
≈ per month	£3,550
Income tax	£11,432 £953/mo
Employee NI	£3,211 £268/mo
Student loan	£2,755 £230/mo
Child benefit kept	£0
Childcare support	£0
Total kept value	£42,602

More guides

The 60% tax trap: why £100k–£125k is the worst place to earn

Between £100,000 and £125,140 the personal allowance taper pushes your real marginal rate to 62% — or 69.5% in Scotland. Here's the mechanics and the fix.

The £100k childcare cliff: how £1 of pay can cost you £8,000

Earn £100,001 and you lose free childcare hours and Tax-Free Childcare in full — a hard cliff, not a taper. What it costs a parent of two and the exact fix.

Keep your child benefit: beating the £60k–£80k charge

The High Income Child Benefit Charge claws back 1% of your child benefit per £200 over £60,000. What it's worth, who's tested, and how salary sacrifice keeps it.

Bonus sacrifice: turn a 62%-taxed bonus into pension at full value

A bonus that lands in the £100k–£125k zone keeps you 38p in the pound — or less with children. Exchanging it into your pension before payday keeps 100p.

Scotland's £100k trap: 69.5% marginal tax, but no childcare cliff

Scottish taxpayers face a harsher personal allowance taper — 67.5% plus NI — but Scotland's universal funded hours mean the £100k childcare cliff is much shallower. The 2026/27 bands and what changes.

2026/27 tax year, childcare with registered providers. Your nation sets the income tax bands (Scotland's six-band schedule vs rUK) and the childcare rules: England and Wales lose free hours over £100k, Scotland's funded hours are universal, Northern Ireland has Tax-Free Childcare only. Child benefit is charged on the household's higher earner, and childcare support needs both parents under £100k. This is a modelling tool, not financial advice — check your own position with HMRC or an adviser.