Is Student Loan Deducted Before Tax UK

Learn if student loan is deducted before tax in the UK and how it affects your take-home pay and tax calculation.

Many employees and self employed individuals in the UK with student loans notice a deduction from their income, but it is not always clear how these deductions are calculated or whether they reduce the tax you pay. A common question is whether a student loan is deducted before tax in the UK.

The answer is no. Student loan repayments are not deducted before tax. They are calculated and taken after Income Tax and National Insurance have been applied to your earnings. However, the way these deductions appear on your payslip can sometimes be confusing, especially if you are new to employment or have just crossed the repayment threshold.

This article explains how student loan deductions work in the UK, who they apply to, when they start, and how they interact with your other tax obligations.

What Is a Student Loan Deduction?

If you studied at university and took out a loan from the Student Loans Company (SLC), you are required to repay it once your income exceeds a certain level. The amount you repay depends on your income, not the amount you borrowed.

The key features of student loan deductions are:

  • Repayments start once your income exceeds a specific threshold

  • The deduction is a fixed percentage of your earnings above that threshold

  • The repayment is collected through the tax system, either via PAYE or Self Assessment

  • The loan is eventually written off if not repaid in full within a set timeframe

Although repayments are collected by HMRC alongside tax and National Insurance, they are not a tax themselves and do not reduce your taxable income.

When Are Student Loan Repayments Made?

Student loan repayments begin from the April after you leave your course, provided you are earning above the threshold for your repayment plan.

There are several plans currently in use:

  • Plan 1: For undergraduate courses started before 1 September 2012 (England and Wales), or all Scottish and Northern Irish loans

  • Plan 2: For undergraduate courses started in England or Wales from 1 September 2012 onwards

  • Plan 4: For Scottish loans issued since April 2021

  • Plan 5: Introduced for some loans issued from August 2023

  • Postgraduate Loan: For postgraduate master’s and doctoral courses

Each plan has its own repayment threshold and percentage rate. As of the 2024/25 tax year:

  • Plan 1: 9% of income over £24,990

  • Plan 2: 9% of income over £27,295

  • Plan 4: 9% of income over £27,660

  • Plan 5: 9% of income over £25,000

  • Postgraduate Loan: 6% of income over £21,000

You may be on more than one plan if you took out both undergraduate and postgraduate loans.

Are Student Loan Repayments Deducted Before or After Tax?

Student loan deductions are taken after tax and National Insurance. This means:

  • You first pay Income Tax on your gross income

  • You then pay National Insurance (if applicable)

  • Student loan repayments are calculated on your remaining pay

  • The repayment does not reduce the amount of tax or National Insurance you pay

For example, if your gross salary is £35,000 and you are on Plan 2:

  • Your Income Tax and National Insurance are calculated in full

  • Your student loan repayment is 9% of £7,705 (£35,000 minus £27,295)

  • You repay approximately £693.45 for the year (£57.79 per month)

Because student loan repayments are taken from net pay (after tax and NI), they do not offer any tax relief and are not classed as an allowable deduction on your tax return.

How Are Student Loan Deductions Collected?

Employees
If you are employed, your student loan repayments are automatically deducted via PAYE, along with your tax and National Insurance. You will see this listed separately on your payslip, usually under a line labelled “Student Loan” or “Postgraduate Loan.”

Your employer calculates the repayment based on your gross income, checks whether you are above the threshold, and applies the relevant percentage. You do not need to do anything unless there is a mistake or you want to make extra payments.

Self employed
If you are self employed, you must make student loan repayments through your Self Assessment tax return. HMRC will calculate your repayment based on your total income for the year and apply the correct rate depending on your loan plan.

You are still responsible for tracking your repayment plan and ensuring the correct boxes are completed on the return. Failing to declare your loan status can result in underpayment or penalties.

Do Student Loan Repayments Reduce Your Taxable Income?

No. Student loan repayments are not tax deductible. They do not reduce your taxable income or affect how much tax you pay. They are a separate payment that is collected through the tax system but does not change your tax calculation.

This can catch some people off guard, particularly those who assume that their loan deduction lowers their overall tax bill. While the repayments reduce your take-home pay, they are not classed as a tax and do not result in any form of relief or deduction.

Can You Make Voluntary Payments?

Yes, you can choose to make additional payments to reduce your balance faster. This can be done directly through the Student Loans Company online, by phone or by bank transfer.

Voluntary payments are separate from PAYE or Self Assessment deductions. Before making extra payments, consider whether it is financially worthwhile. Student loans are written off after a certain period, and for many borrowers, they will never be repaid in full. Paying off early is only likely to save money if you expect to earn well above the repayment threshold for most of your working life.

Voluntary repayments also do not reduce your taxable income, and they are not eligible for any kind of tax relief.

How Long Do Repayments Last?

Each repayment plan has a different loan term. For example:

  • Plan 1 loans are written off 25 years after the April you were first due to repay

  • Plan 2 loans are written off 30 years after the April you were first due to repay

  • Plan 5 loans are written off 40 years after repayment begins

  • Postgraduate loans are written off after 30 years

If you have not fully repaid your loan by the end of the repayment term, the balance is cleared, and you owe nothing more. Any unpaid interest is also written off at that point.

What Happens If You Move Abroad?

If you leave the UK, your student loan is still repayable, but the way you pay changes. You must inform the Student Loans Company and complete an overseas income assessment. Your repayment threshold will be adjusted based on the cost of living in your new country, and you will be asked to make payments directly rather than through PAYE or Self Assessment.

If you do not report your income while living abroad, you may be charged a default monthly amount or face penalties.

Conclusion

Student loan repayments in the UK are not deducted before tax. They are calculated separately and taken from your income after Income Tax and National Insurance have been applied. While they are collected through the tax system, they are not a form of tax and do not reduce your taxable income.

Understanding this distinction is important for managing your payslips, budgeting, and planning any voluntary payments. Whether you are employed or self employed, student loan repayments are a separate responsibility and must be reported correctly to avoid overpayment or penalties.

If you are unsure which repayment plan you are on or how your loan is being managed, you can check with the Student Loans Company or seek advice from a tax professional. Being proactive about your student loan helps you stay on top of your finances and avoid unpleasant surprises later on.