Work out your take-home pay
Income tax, National Insurance and net pay for any UK salary, 2026-27.
The Plan 4 student loan threshold is £33,795 a year for the 2026-27 tax year, and borrowers repay 9% of their earnings above it through payroll [1][2]. Scottish-domiciled higher education borrowers owed £10.4 billion at the end of the 2025-26 financial year, a 10.4% rise on the year before [3], and the official series tracks that balance year by year [24].
Plan 4 is the loan type for people whose student finance came from the Student Awards Agency Scotland (SAAS), whether they studied an undergraduate or a postgraduate course [4]. Because employees move freely across the UK, an employer in Manchester, Cardiff or Belfast is just as likely to run a Plan 4 deduction as an employer in Edinburgh. The plan has the highest repayment threshold of the four undergraduate plans, which means a Plan 4 employee often repays far less than a colleague on the same salary with a different loan.
This guide explains who repays on Plan 4, the exact weekly, monthly and annual thresholds, how the deduction is calculated and rounded, how Plan 4 interacts with the other plan types, and which notices switch deductions on and off. It closes with worked figures from a payroll engine and the reporting steps that follow each payday.
Key takeaways
- The Plan 4 threshold is £33,795 a year for 2026-27, equal to £2,816.25 a month or £649.90 a week in payroll.
- Deductions are 9% of earnings above the period threshold, rounded down to the nearest whole pound.
- Plan 4 covers SAAS-funded borrowers, including Scottish postgraduate borrowers, who never sit on the separate Postgraduate Loan plan.
- Employers start Plan 4 deductions on a starter checklist answer or an SL1 notice, and stop only on an SL2 notice.
- An employee holds only one plan-type deduction in payroll at a time; where several plans apply, the lowest threshold is used.
- Plan 4 has nothing to do with Scottish income tax: the loan follows where the borrower was funded, not where they live or work.
Who repays on Plan 4
Plan 4 exists because the Scottish Government chose to give Scottish borrowers their own repayment terms. From 6 April 2021, a new plan type was introduced for Scottish student loan borrowers, and HMRC began sending employers SL1 start notices either to switch existing deductions from Plan 1 to Plan 4 or to start Plan 4 deductions afresh [5][6].
SAAS borrowers, undergraduate and postgraduate
The defining test is the funding body, not the university or the employee's current address. Anyone who received a loan from SAAS repays on Plan 4, and gov.uk states this applies whether the course was undergraduate or postgraduate [4]. The written-off guidance confirms the same point from the other direction: a postgraduate student from Scotland is on Plan 4 [7].
This matters for payroll because the Postgraduate Loan plan, with its own 6% rate, is reserved for borrowers funded in England and Wales [4]. A Scottish graduate with both a SAAS undergraduate loan and a SAAS postgraduate loan therefore carries a single Plan 4 deduction, not two separate deductions [2].
Borrowers moved from Plan 1 in 2021
Plan 4 did not start empty. In 2021-22, all existing Scottish borrowers who had started a higher education course in August 1998 or later were moved from Plan 1 to Plan 4, and their repayment threshold rose from £19,390 to £25,000 at that point [3]. HMRC's collection manual records that employers received an SL1 to make that switch [5].
The practical consequence is that a long-serving employee who once had a Plan 1 deduction may now sit on Plan 4. Payroll records created before April 2021 should show the switch; where they still show Plan 1 for a SAAS borrower with no later notice, the employer should check the latest notice on file before changing anything [1].
The Plan 4 thresholds for 2026-27
A repayment threshold is the level of earnings below which nothing is deducted. Payroll does not apply the annual figure directly; it uses a period threshold that matches the pay frequency [6].
Weekly, monthly and annual figures
HMRC's payroll specification divides the annual threshold by 52 for weekly pay and by 12 for monthly pay, rounding the result down to the penny [6]. The employer guidance publishes the same figures for April 2026 onwards [1].
| Pay frequency | Plan 4 threshold 2026-27 |
|---|---|
| Annual | £33,795 |
| Monthly | £2,816.25 |
| Four-weekly | £2,599.61 |
| Fortnightly | £1,299.80 |
| Weekly | £649.90 |
The borrower-facing page rounds these to £2,816 a month and £649 a week for readability [8]. Payroll software should use the penny figures from the specification, because the difference can move a deduction by a pound in some periods [6].
How the threshold has moved since 2021
Unlike some other plans, the Plan 4 threshold has risen every April since the plan launched. The specification lists the full history, and the table below shows it with the rate, which has stayed at 9% throughout [6].
| Tax year | Plan 4 annual threshold | Rate |
|---|---|---|
| 2021-22 | £25,000 | 9% |
| 2022-23 | £25,375 | 9% |
| 2023-24 | £27,660 | 9% |
| 2024-25 | £31,395 | 9% |
| 2025-26 | £32,745 | 9% |
| 2026-27 | £33,795 | 9% |
Thresholds change on 6 April each year [8]. An employer that forgets to load the new figure keeps deducting against the old threshold, which over-deducts from every Plan 4 employee from the first payday of the new tax year [1].
Plan 4 against the other plans
The thresholds differ sharply across plan types, which is why the plan letter on each record matters so much. The table compares the 2026-27 figures used in payroll [1][2].
| Plan | Annual threshold | Monthly threshold | Rate |
|---|---|---|---|
| Plan 1 | £26,900 | £2,241.66 | 9% |
| Plan 2 | £29,385 | £2,448.75 | 9% |
| Plan 4 | £33,795 | £2,816.25 | 9% |
| Plan 5 | £25,000 | £2,083.33 | 9% |
| Postgraduate Loan | £21,000 | £1,750 | 6% |
There is no Plan 3 in payroll terms. The Plan 4 threshold sits well above Plan 1, so mistaking one for the other has a visible effect on net pay [6].
How a Plan 4 deduction is calculated
The formula is the same for every undergraduate plan. The specification sets it as earnings in the period minus the period threshold, multiplied by the rate, with the result rounded down to the pound [6].
Which earnings count
The earnings used for the deduction are the same gross pay figure used to calculate Class 1 secondary National Insurance, not taxable pay [1]. Because the same pay figure drives both calculations, any arrangement that changes NI-able pay, such as salary sacrifice, changes the student loan deduction too [6].
Each pay period stands alone. Gov.uk's terms guidance explains that repayments are worked out on individual pay periods rather than on income for the whole year, so a high month produces a larger deduction even if the annual total would sit below the threshold [10][6]. Any over-repayment across the year is refunded to the borrower by the Student Loans Company, not by the employer [11].
Rounding and reporting
The deduction is always rounded down to a whole pound [6]. The amount is then entered in whole pounds on the employee's Full Payment Submission and on the P60 at the end of the year [1][12].
The FPS is due on or before each payday, and the student loan figure travels in the same submission as tax and National Insurance [13]. HMRC passes the collected amount to the Student Loans Company, which updates the borrower's balance [14].
Worked examples for Plan 4
The figures below come from the Moonworkers payroll engine, applying the 2026-27 rules. Each assumes NI category A [9] and the standard personal allowance, with a Scottish tax code where the employee is a Scottish taxpayer.
Monthly pay at £3,000 and £3,750
An employee paid £3,000 a month on Plan 4 clears the monthly threshold by a modest margin, and the engine returns a Plan 4 deduction of £16 [1][2]. Gov.uk's own example for the same monthly salary lands on the same £16 [2]. As a Scottish taxpayer on S1257L, the same employee pays £392.27 of income tax and £156.16 of employee National Insurance, and takes home £2,435.57.
At £3,750 a month the Plan 4 deduction rises to £84, alongside £572.87 of income tax and £216.16 of employee NI, for take-home pay of £2,876.97 [6][15]. The step from £16 to £84 shows how quickly the deduction grows once pay clears the threshold, because every extra pound above it adds 9% to the amount due.
Weekly pay and a bonus month
A weekly-paid employee earning £700 clears the £649.90 weekly threshold by a narrow margin, and the engine returns a Plan 4 deduction of £4, with £92.15 of income tax and £36.64 of employee NI [6][1].
The period-by-period rule shows clearly in a bonus month. An employee usually paid £2,700 a month has a Plan 4 deduction of £0, because that pay sits below the monthly threshold. In a month where a bonus lifts gross pay to £6,000, the deduction jumps to £286 [10][6]. If the borrower's annual income ends below £33,795, the borrower reclaims the excess from the Student Loans Company [11].
The same salary on four different plans
Plan type changes the deduction more than most employers expect. The table shows the monthly deduction the engine returns for an employee paid £3,000 a month under each undergraduate plan [1][2].
| Plan | Student loan deduction on £3,000 a month |
|---|---|
| Plan 5 | £82 |
| Plan 1 | £68 |
| Plan 2 | £49 |
| Plan 4 | £16 |
An employee recorded on Plan 1 when the correct plan is Plan 4 loses £52 of net pay every month, which is why the plan type on the SL1 deserves a second look on every new record [4].
Starting, switching and stopping Plan 4 deductions
Employers have no discretion over whether to deduct. Deductions follow the information supplied by the employee and the notices issued by HMRC [1][16].
New starters and the starter checklist
When a new employee joins without a P45 showing a student loan, the starter checklist asks whether the employee has a student or postgraduate loan and which plan applies [17]. Gov.uk tells employers that the checklist should identify the plan or loan type, or both, to use [1].
Where the employee confirms a loan but cannot say which plan, the employer should use Plan 5 until an SL1 arrives. Gov.uk limits this fallback to the undergraduate plan types (Plans 1, 2 and 4), so it never covers a Postgraduate Loan [1]. For a SAAS borrower this temporary Plan 5 deduction is heavier than the eventual Plan 4 deduction, so the SL1 should be processed on the next available payday once it arrives [18].
SL1 and SL2 notices
An SL1 start notice tells the employer which plan type to use, and deductions start from the next available payday [1]. HMRC used the same notice in 2021 to move existing Scottish borrowers onto Plan 4 [5].
An SL2 stop notice ends deductions. The employer stops on the first available payday after the stop date shown, and never stops because an employee says the loan has been repaid [1][14].
Employees with more than one plan
Only one plan-type deduction runs through payroll at a time. The specification states that employers will only have to use one student loan, whether Plan 1, 2, 4 or 5 [6]. Gov.uk explains that a borrower with several plans repays 9% over the lowest threshold of the plans held, as a single deduction [2].
Where an employee holds several plans and no SL1 has arrived, the employer starts deductions for the plan with the lowest threshold [1]. A Postgraduate Loan from England or Wales, if held, runs alongside the plan deduction at 6% above its own threshold [2][6].
Plan 4 beyond the payslip
Payroll handles most Plan 4 repayment, but not all of it [25]. A few borrower rules shape the questions employees bring to the payroll team.
Repayment start, interest and write-off
The earliest a borrower starts repaying is the April after leaving the course [8]. Gov.uk shows Plan 4 interest currently charged at 4.1%, and publishes separate guidance on how Plan 4 interest is calculated [2][19].
A Plan 4 loan first paid on or after 1 August 2007 is written off 30 years after the April the borrower was first due to repay. A loan first paid before that date is written off at age 65 or after 30 years, whichever comes first [7]. Once a balance is cleared or cancelled, HMRC issues the SL2 that stops payroll deductions [1].
Overseas earnings and Self Assessment
Plan 4 borrowers working abroad leave the payroll system and repay directly. The Student Loans Company publishes country-specific thresholds; for 2026-27 the UK figure is £33,795, while the threshold for borrowers in Spain, France and Germany is £27,045 [20][21].
Self-employed borrowers repay through Self Assessment, and HMRC works out the amount from the tax return [11]. An employee who also files a return should see payroll deductions credited against the annual liability, which is why the P60 figure has to be exact [12].
Common Plan 4 payroll errors
Most Plan 4 mistakes come from treating Scottish borrowers as a tax category rather than a loan category, or from stale thresholds.
Confusing Plan 4 with Scottish income tax
Scottish income tax depends on where the employee lives, and HMRC signals it with an S prefix on the tax code [15]. Plan 4 depends on who funded the loan [4]. A SAAS graduate living in London pays rest-of-UK income tax [26] and still repays on Plan 4, while an English-funded graduate in Glasgow pays Scottish income tax and repays on Plan 2 or Plan 5.
Payroll systems should therefore never derive the plan type from the tax code or the home postcode. The plan comes from the SL1 or the starter checklist and nowhere else [1][17].
Stale thresholds and the wrong period figure
Because the Plan 4 threshold has risen every year since 2021, a payroll that misses the April update will over-deduct [6]. HMRC publishes the yearly figures in its payroll technical specifications for software developers [22].
The second error is using the rounded borrower figure of £2,816 instead of £2,816.25 [8][1]. The rules are set out in the Education (Student Loans) (Repayment) Regulations, and HMRC's specification is the version payroll software is expected to follow [23][6].
What this means for payroll software
Plan 4 is a good test of whether payroll software holds loan logic separately from tax logic. Every plan has its own threshold set, every pay frequency has its own period figure, and every notice must change the record on the right payday.
An HMRC-recognised payroll product loads the new thresholds each April and applies them automatically. Moonworkers' UK payroll software for SMEs runs Plan 1, 2, 4 and 5 and the Postgraduate Loan side by side, and bureaux running dozens of Scottish and English schemes can manage the same rules across clients from a multi-client payroll dashboard.
Platforms that want the same calculations inside their own product can call the HMRC-recognised payroll API, which returns the plan deduction, the PGL deduction, tax and NI in one response. The endpoints are listed in the API documentation. For background on the other plans, the guides to the Plan 1 student loan and the Plan 2 threshold cover the same mechanics for English and Welsh borrowers.
Check a Plan 4 deduction on any salary
The Moonworkers UK salary calculator applies the 2026-27 PAYE, National Insurance and student loan rules to any gross salary, including Plan 4 and Scottish tax codes.
£ 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 4 is defined by a single fact: who funded the loan. Everything else follows from it, from the £33,795 threshold to the treatment of Scottish postgraduate borrowing as part of the same plan. Employers who keep the plan type separate from the tax code, load the new figures each April and act only on SL1 and SL2 notices will run Plan 4 correctly for every employee, wherever that employee lives.
The threshold has climbed every year since the plan was created, and the gap between Plan 4 and the other plans has widened with it. As more SAAS graduates join employers across the UK, the plan letter on each payroll record carries more weight in net pay, and software that treats every plan as a distinct rule set becomes a basic requirement rather than a refinement.
Frequently asked questions
Is a Scottish postgraduate loan repaid on Plan 4 or as a Postgraduate Loan?
A postgraduate loan from SAAS is repaid on Plan 4, not on the separate Postgraduate Loan plan [4]. The Postgraduate Loan plan, with its 6% rate and £21,000 threshold, applies to borrowers funded in England and Wales [2]. A Scottish borrower with both undergraduate and postgraduate SAAS loans has one Plan 4 deduction.
What is the Plan 4 monthly threshold for 2026-27?
The monthly Plan 4 threshold used in payroll is £2,816.25, and the weekly threshold is £649.90 [1]. Both derive from the annual threshold of £33,795 [6]. Gov.uk's borrower pages round them to £2,816 and £649.
Does an employee who moves to England stay on Plan 4?
Yes. The plan depends on the body that funded the loan, so a SAAS borrower stays on Plan 4 after moving anywhere in the UK [4]. The move may change the employee's income tax from Scottish to rest-of-UK rates, but it does not change the loan plan [15].
What should an employer do if a Scottish employee does not know the plan type?
The employer should use Plan 5 until HMRC sends an SL1 start notice confirming the plan [1]. The fallback covers undergraduate loans only, never a Postgraduate Loan [2]. Once the SL1 confirms Plan 4, deductions switch from the next available payday.
