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Income tax, National Insurance and net pay for any UK salary, 2026-27.
Plan 1 student loan repayment starts once earnings pass £26,900 a year, and the deduction is a flat 9% of everything above that line. Around 1.5 million students borrow roughly £21 billion a year in England alone [1], and a large share of the resulting repayments flow back to HMRC through employers, one payslip at a time.
For the employer, Plan 1 is not an optional calculation. HMRC issues a start notice, the payroll must act on it from the next available pay date, and the deduction sits on the same Real Time Information submission as PAYE tax and National Insurance. Getting the plan type, the threshold and the rounding right is a routine part of running compliant UK payroll.
This article sets out who is on Plan 1, the 2026-27 threshold in weekly, monthly and annual terms, the exact calculation with worked examples, how the start and stop notices work, and the edge cases (multiple loans, unknown plan types, leavers) that trip payroll teams up most often.
Key takeaways
- Plan 1 repayments are 9% of earnings above the 2026-27 threshold of £26,900 a year, £2,241 a month or £517 a week.
- Plan 1 covers pre-September 2012 borrowers in England and Wales, plus all borrowers in Northern Ireland.
- Employers start deducting only on receipt of an SL1 notice from HMRC, and stop only on an SL2 notice.
- Every deduction is rounded down to the nearest whole pound and reported on the Full Payment Submission.
- If a postgraduate loan runs alongside Plan 1, the postgraduate loan is deducted first.
What Plan 1 is and who repays it
Plan 1 is the oldest of the income-contingent student loan plans still being collected through payroll. It applies to a specific group of borrowers defined by where and when they studied, not by how much they earn or what they studied.
The borrowers on Plan 1 are those who took out an undergraduate loan in England or Wales before 1 September 2012, together with every borrower in Northern Ireland regardless of start date [2]. Scottish borrowers who once sat on Plan 1 were moved to Plan 4 from April 2021, so a current Scottish loan is collected under Plan 4 rather than Plan 1 [3].
An employer does not decide which plan applies. That is set by the Student Loans Company and communicated to the employer by HMRC. Where an employer is unsure, the correct action is to ask the employee to confirm the plan type shown in their online student finance account, not to guess.
Plan 1 in the context of the five plans
Plan 1 is one of five loan types that a UK payroll may need to operate. Each has its own threshold, but all share the same 9% recovery rate, with one exception for postgraduate loans, which run at a different rate on a separate threshold.
| Plan | Who is on it | 2026-27 annual threshold | Rate |
|---|---|---|---|
| Plan 1 | Pre-2012 England and Wales, all Northern Ireland | £26,900 | 9% |
| Plan 2 | Post-2012 England and Wales | £29,385 | 9% |
| Plan 4 | Scotland | £33,795 | 9% |
| Plan 5 | England, 2023-24 intake onwards | £25,000 | 9% |
| Postgraduate Loan | Master's and doctoral borrowers | £21,000 | 6% |
There is deliberately no Plan 3, which is a frequent source of confusion [4]. The numbering reflects the order in which the plans were introduced, not a missing category. Plan 5 is the newest, introduced for repayment from 6 April 2026 and carrying the lowest threshold of the undergraduate plans at £25,000 [5].
Modern UK payroll software holds all five plan types plus the postgraduate loan against a single employee record and applies the correct threshold automatically, which removes the risk of an administrator selecting the wrong plan by hand.
The 2026-27 Plan 1 threshold
The threshold is the figure below which no repayment is due. For Plan 1 in the 2026-27 tax year it is set at £26,900 a year [6]. The threshold rises each April in line with the Retail Price Index, which is why every article on the topic anchors to the tax year rather than a calendar figure.
Payroll does not work in annual figures, though. It works in the pay period, so the annual threshold has to be broken down to weekly or monthly equivalents before any deduction is calculated.
| Pay frequency | Plan 1 threshold | Basis |
|---|---|---|
| Annual | £26,900 | Reference figure |
| Monthly | £2,241 | £26,900 ÷ 12 |
| Weekly | £517 | £26,900 ÷ 52 |
| Four-weekly | £2,069 | £26,900 ÷ 13 |
The critical point for payroll is that the threshold is applied per pay period, in isolation. An employee paid monthly who earns above £2,241 in one month makes a repayment for that month, even if their annual salary would sit below £26,900 [7]. This is why a one-off bonus, a commission month or a period of overtime can trigger a deduction that does not recur.
Why period earnings matter more than salary
The pay-period basis has a practical consequence that surprises employees. Someone on a £24,000 salary who receives a £4,000 bonus in a single month is assessed on that month's total, which pushes their period earnings well above the monthly threshold and produces a repayment for that month alone.
The employer has no discretion to smooth this out. The deduction is calculated on the actual earnings paid in the period the bonus falls in [8]. Any over-collection across the year that results is reconciled by the Student Loans Company, not corrected in the payroll, and the employee can claim a refund directly from the Student Loans Company where their total annual income turned out to be below the threshold.
How the Plan 1 deduction is calculated
The Plan 1 calculation is simple arithmetic, but the rounding and the pay-period basis are where errors creep in. The formula is the same for every undergraduate plan, only the threshold changes.
The deduction is: (period earnings minus the period threshold) multiplied by 9%, then rounded down to the nearest whole pound [9]. Rounding down, never to the nearest penny and never up, is a rule that applies to every student loan deduction on every payslip.
A worked monthly example
Consider an employee on Plan 1 paid £3,000 in a month. The monthly threshold is £2,241 (£26,900 ÷ 12, taken as £2,241.66 in the underlying calculation). The excess is £3,000 minus £2,241.66, which is £758.34. Applying 9% gives £68.25, which rounds down to a deduction of £68 for the month.
The same employee across a full year on a steady £36,000 salary repays roughly £818, which is 9% of the £9,100 by which £36,000 exceeds the £26,900 threshold. The annual figure is a useful sense-check, but the payroll always works month by month rather than dividing an annual number by twelve.
A worked weekly example
An employee on Plan 1 paid £600 in a week is measured against the weekly threshold of £517. The excess is £83, and 9% of £83 is £7.47, which rounds down to a £7 deduction for that week [10]. A week in which the same employee earns £500, below the threshold, produces no deduction at all, and no memory of the shortfall carries forward.
The contrast between plans is stark at the same salary. An employee earning £35,000 repays around £729 a year on Plan 1, but a Scottish borrower on Plan 4, with its £33,795 threshold, repays only around £108 on the same salary, because far less of their pay sits above the line [11]. The plan type, not the salary, drives the outcome.
Start and stop notices: the employer's triggers
An employer never begins or ends a student loan deduction on its own initiative. The whole process is driven by formal notices from HMRC, and acting outside those notices is itself an error.
The employer starts deducting Plan 1 only on receipt of an SL1 start notice, which names the employee and the plan type to operate [12]. The employer stops only on receipt of an SL2 stop notice. Between those two events, the deduction runs on every payrun where earnings exceed the threshold.
| Notice | Meaning | Employer action |
|---|---|---|
| SL1 | Start a student loan (Plan 1, 2, 4 or 5) | Begin deducting from the next available pay date |
| SL2 | Stop a student loan | Cease deducting from the next available pay date |
| PGL1 | Start a postgraduate loan | Begin the separate PGL deduction |
| PGL2 | Stop a postgraduate loan | Cease the PGL deduction |
There is one situation where an employer starts a deduction without an SL1: when a new starter's P45 or starter checklist indicates a student loan is in repayment. In that case the employer begins deducting on a default basis until HMRC confirms the plan type [13]. Where the plan type is genuinely unknown, HMRC's instruction is to default to Plan 1, because its threshold is among the lowest and therefore the safest starting point.
The Generic Notification Service reminder
HMRC also sends Generic Notification Service messages that sit alongside the formal notices. One common message reminds an employer to stop deductions from the next pay date and confirms that an SL2 or PGL2 is on its way [14]. These reminders are prompts, not instructions to be actioned in isolation, and the employer still relies on the formal stop notice as the trigger.
An HMRC-recognised payroll engine ingests these notices and reflects them on the correct payrun automatically, which is where holding the HMRC Recognised badge matters, because the badge certifies that the software submits and processes RTI data to HMRC's specification.
Edge cases that catch payroll teams out
Most Plan 1 payruns are routine. The exceptions are where mistakes concentrate, and each has a defined correct answer.
An employee with two loans
An employee can hold an undergraduate loan and a postgraduate loan at the same time, and both are deducted on the same payslip. The rule is that the postgraduate loan is deducted first, because it carries a different repayment structure and threshold [15]. The two deductions are calculated independently against their own thresholds, then both reported on the Full Payment Submission.
This trips up teams who assume deductions run in plan-number order. Plan number has nothing to do with priority; the postgraduate loan always comes first where both apply. The mechanics of the two deductions are covered in more detail in the guide to how student loan deductions work through payroll.
Leavers and the P45
When an employee with a Plan 1 loan leaves, the employer continues to deduct up to and including the final payslip, then records the ongoing student loan status on the P45 [16]. The employer does not issue any student loan refund; any over-collection is a matter between the employee and the Student Loans Company. The next employer picks the deduction back up when a new SL1 arrives or the P45 indicates a loan is in repayment.
There is a further wrinkle when an employer receives an SL1 for someone who has already left. In that case the notice is simply not actioned, because there is no live employment to deduct from, and the employer does not need to contact HMRC to explain the absence of deductions. The Student Loans Company reconciles the borrower's account from the Real Time Information it already receives, so the gap between employments corrects itself without any manual intervention from the former employer.
The pay-period trap on irregular earnings
Because each pay period is assessed alone, an employee with volatile earnings can repay in some periods and not others across a single year. A payroll platform for SMEs handles this automatically by recalculating against the period threshold every payrun, but an employer running the maths by hand has to resist the temptation to annualise, which would produce the wrong figure in any month where earnings spiked or dipped.
Work out a student loan deduction alongside PAYE
Before running a payrun, an employer can size the full deduction stack, PAYE tax, National Insurance and student loan, with the Moonworkers UK salary calculator, which applies the 2026-27 thresholds to any gross salary.
£ per month
e.g. 1257L, S1257L, BR, D0
S = Scotland · C = Wales · W1/M1 = non-cumulative
Enter a salary or hourly rate above
About this calculator
This calculator gives you a close estimate of your UK payroll deductions for 2026-27, using HMRC's exact percentage method with periodised thresholds. It handles the three tax territories, K codes with the 50% regulatory limit and its carry-forward, weeks 53, 54 and 56, the cumulative and W1/M1/X bases, student and postgraduate loans, and pension contributions on qualifying earnings. It still won't match your payslip to the penny in every case: it does not cover in-year tax code changes, payrolled benefits in kind, NI deferral across more than one employment, directors on the annual earnings period, or employer-level annual adjustments such as the Employment Allowance and the apprenticeship levy. Powered by the same engine as the Moonworkers Payroll API.
Frequently asked questions
Why might the result differ from my payslip?
This calculator uses your current gross pay and tax code to produce an estimate. K-code carry-forwards and weeks 53, 54 and 56 are handled, and the Year-to-date section reproduces a specific period exactly. What your employer may apply that this does not: a mid-year tax code change, benefits in kind processed through payroll, or NI deferral across more than one employment. For most employees on a standard tax code the difference is negligible.
What tax code should I enter?
Use the tax code shown on your most recent payslip or the PAYE Coding Notice (P2) from HMRC. If you're not sure, 1257L is the standard code for most employees resident in England, Wales, or Northern Ireland. Use S1257L for Scotland or C1257L for Wales if you pay Scottish or Welsh income tax.
Which NI category applies to me?
Most employees use Category A. Use M if you are under 21, H if you are an apprentice under 25, or C if you are over State Pension age. Your employer is responsible for assigning the correct category — if in doubt, check your payslip.
Which student loan plan am I on?
Your plan depends on when and where you studied. Plan 1 covers students who started before September 2012. Plan 2 is for English and Welsh students who started from September 2012 to July 2023. Plan 5 applies to English students who started from August 2023. Plan 4 covers Scottish students. You can check your plan at gov.uk or on your payslip.
What is the YTD cumulative PAYE mode?
HMRC's standard method calculates income tax on your total earnings to date each period, then subtracts tax already paid. If you're mid-year and want to see exactly what tax should be deducted in a specific period, expand the Year-to-date section and enter your running totals from previous periods only.
Conclusion
Plan 1 is the simplest of the student loan plans to describe and one of the easiest to get subtly wrong. The mechanics reduce to a single line of arithmetic, 9% of earnings above £26,900 a year, rounded down, but the pay-period basis, the start and stop notices, the postgraduate priority rule and the treatment of leavers all sit around that line and each carries its own trap.
The direction of travel is towards more automation of exactly this kind of rule-driven deduction. As the newest Plan 5 borrowers enter repayment and the population of plan types on a typical payroll grows, the value of software that reads the notice, applies the right threshold and files the result to HMRC without manual intervention only increases. The employer that treats student loan collection as plumbing rather than a monthly puzzle is the one that stays compliant with the least effort.
Frequently asked questions
How much is repaid on a Plan 1 student loan?
Plan 1 repayment is 9% of everything earned above the threshold, which is £26,900 a year, £2,241 a month or £517 a week for the 2026-27 tax year. An employee earning £35,000 repays around £729 across the year. Nothing is repaid on earnings below the threshold, and the deduction is recalculated separately in each pay period.
Who is on Plan 1 rather than Plan 2 or Plan 4?
Plan 1 covers borrowers who took out an undergraduate loan in England or Wales before 1 September 2012, plus all borrowers in Northern Ireland. Post-2012 English and Welsh borrowers are on Plan 2, Scottish borrowers are on Plan 4, and the newest English borrowers from the 2023-24 intake are on Plan 5. The Student Loans Company sets the plan, and HMRC tells the employer which one to operate.
When does an employer start deducting a Plan 1 student loan?
An employer begins deducting only when HMRC sends an SL1 start notice, or when a new starter's P45 or starter checklist shows a loan is already in repayment. Deductions continue on every payrun where earnings exceed the threshold until HMRC issues an SL2 stop notice. The employer never starts or stops on its own judgement.
What happens if someone has both a student loan and a postgraduate loan?
Both are deducted on the same payslip, and the postgraduate loan is taken first. Each is calculated independently against its own threshold and rate, then both are reported on the Full Payment Submission to HMRC. Deducting in plan-number order is a common mistake; the postgraduate loan always has priority where both apply.
