Key facts
- Student loans are not taxable income — you do not pay Income Tax on maintenance or tuition loans.
- Repayments are collected at 9% above the threshold (6% for postgraduate loans) via PAYE or Self Assessment.
- Plan 2 threshold for 2025/26 is £27,295; Plan 5 (post-2023 England) is £25,000.
- Grants, bursaries, and scholarships for tuition or maintenance are generally not taxable.
- If you have both an undergraduate and postgraduate loan, you may repay up to 15% of income above the respective thresholds simultaneously.
Student Loans Are Not Taxable Income
A common misconception is that student loans count as taxable income. They do not. Whether you receive a tuition fee loan, a maintenance loan, or a postgraduate loan, the money is not subject to Income Tax and does not need to be declared on a tax return.[1]
This applies regardless of how much you receive. The loan is a debt, not earnings, so it sits entirely outside the Income Tax system.
Grants, Bursaries & Scholarships
Educational grants, bursaries, and scholarships intended for tuition fees or maintenance are generally not taxable. HMRC treats them as support for education rather than income.[3]
There are exceptions:
- Employer-sponsored scholarships — if you receive funding from an employer on condition that you work for them, HMRC may treat the payments as employment income
- Research grants with an employment element — if a grant funds your living costs while you are effectively employed as a researcher, part of the payment could be taxable
- Stipends — PhD stipends funded by research councils (UKRI) are typically tax-free, but stipends from other sources may be taxable depending on the terms
Key point: The tax-free treatment applies to payments made to support full-time education. If a payment is essentially wages in disguise — for example, a “bursary” that requires you to work set hours — HMRC may reclassify it as employment income.
Repayment Plan Types & Thresholds (2025/26)
Student loan repayments begin once your income exceeds the threshold for your plan type. Below the threshold, you pay nothing.[2]
| Plan | Who It Covers | Annual Threshold | Rate |
|---|---|---|---|
| Plan 1 | Pre-2012 England/Wales; all NI loans | £24,990 | 9% |
| Plan 2 | Post-2012 England/Wales (before 2023/24) | £27,295 | 9% |
| Plan 4 | Scottish student loans | £31,395 | 9% |
| Plan 5 | England/Wales loans from 2023/24 onwards | £25,000 | 9% |
| Postgraduate Loan | Master’s or doctoral loans (England/Wales) | £21,000 | 6% |
Repayments are calculated on income above the threshold, not on total income. For example, if you earn £30,000 on Plan 2, you repay 9% of £2,705 = roughly £243 per year.
How Repayments Work via PAYE
If you are employed, your employer deducts student loan repayments from your pay alongside PAYE tax and National Insurance. HMRC tells your employer which plan you are on using a Student Loan Notice (SL1 or SL2), which triggers the correct deduction.[1]
Your payslip will show the deduction separately from tax. Common issues include:
- Wrong plan type: If HMRC assigns the wrong plan, your threshold and repayment amount will be incorrect. Contact the Student Loans Company (SLC) to correct it.
- Repaying after the loan is cleared: If deductions continue after your loan is paid off, you can claim a refund from the SLC.
- Multiple jobs: Each employer applies the threshold separately, so you may under-repay if your combined income exceeds the threshold but neither job alone does. This is corrected via Self Assessment.
Repayments Through Self Assessment
If you are self-employed or have untaxed income, student loan repayments are calculated on your Self Assessment return. HMRC adds the repayment to your tax bill based on your total taxable income for the year.[1] You can include your student loan details when you file your Income Tax return online.
Tip: Student loan repayments are not tax-deductible. You cannot claim them as a business expense or deduct them from your taxable income. They are a separate obligation calculated alongside — but not as part of — your tax liability.
Having Multiple Loans at Once
If you have both an undergraduate loan (Plan 1, 2, 4, or 5) and a postgraduate loan, repayments are calculated separately on each loan. This means you could repay:[2]
- 9% above your undergraduate threshold, plus
- 6% above the postgraduate threshold (£21,000)
In total, that could be up to 15% of your income above the lower threshold. For someone earning £35,000 with a Plan 2 loan and a postgraduate loan, the combined annual repayment would be roughly £693 (undergraduate) + £840 (postgraduate) = £1,533.
Plan 5: What Changed from 2023/24
Students starting courses in England or Wales from the 2023/24 academic year are placed on Plan 5. The key differences are:
- Lower repayment threshold of £25,000 (versus £27,295 for Plan 2)
- Repayment period extended to 40 years (versus 30 years for Plan 2)
- Interest rate capped at RPI only (no additional percentage based on income)
This means Plan 5 borrowers start repaying sooner and repay for longer, but their balance grows more slowly due to the interest cap.
When Is the Loan Written Off?
Loans are cancelled after a set period regardless of the balance remaining:[1]
| Plan | Written Off After |
|---|---|
| Plan 1 | 25 years after the April you were first due to repay (or age 65 for older loans) |
| Plan 2 | 30 years after the April you were first due to repay |
| Plan 4 | 30 years after the April you were first due to repay (Scottish loans taken from 2007) |
| Plan 5 | 40 years after the April you were first due to repay |
| Postgraduate Loan | 30 years after the April you were first due to repay |
The written-off amount is not treated as taxable income.
Frequently Asked Questions
Is a student loan classed as taxable income?
No. Student loans (maintenance and tuition) are not taxable income. You do not include them on your tax return and they do not affect your Personal Allowance or tax band. However, repayments are collected through the tax system once your earnings exceed the threshold for your plan type.
Are scholarships and bursaries taxable in the UK?
Generally no. Scholarships, bursaries, and educational grants intended for tuition fees or living costs during a course are not taxable. However, if a payment is made in return for services (such as an employer sponsorship that requires you to work for them), it may be treated as employment income.
How do student loan repayments work if I am self-employed?
If you are self-employed, HMRC calculates your student loan repayment based on your total taxable income reported on your Self Assessment return. The amount is added to your tax bill. You cannot claim repayments as a business expense.
What is the difference between Plan 1, Plan 2, Plan 4, and Plan 5?
Plan 1 covers pre-2012 England/Wales and all Northern Ireland loans. Plan 2 covers post-2012 England/Wales loans. Plan 4 is for Scottish loans. Plan 5 applies to England/Wales loans taken from 2023/24 onwards. Each plan has a different repayment threshold and, for Plan 5, a 40-year repayment period.
Further Reading
- Student Loan Repayments & Tax — detailed breakdown of repayment mechanics
- Starting Your First Job — tax codes, PAYE, and what to expect on your first payslip
- Personal Allowance & Tax Bands — how income is taxed and why loans sit outside this
- Registering for Self Assessment — how to set up SA if you are self-employed with student debt
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Sources
- Repaying your student loan — GOV.UK
- Student loan repayment: what you pay — GOV.UK
- Income Tax: taxability of student income — HMRC