Understand how bonuses, commissions, and variable pay affect your student loan deductions. See exactly why your student loan repayment spikes in bonus months.
Student loan repayments are calculated on each pay period's income, causing spikes when bonuses are received.
2012-2023 students (England/Wales)
Threshold: £27,295/year
Rate: 9.0% above threshold
Period threshold: £2,275
Gross Pay
£2,917
Gross Total
£7,917
Including £5,000 bonus
£450
Extra Student Loan
4845.5%
Effective Tax Rate on Bonus
51.5%
Take-Home Rate
| Component | Amount | % of Bonus |
|---|---|---|
| Gross Bonus | £5,000 | 100.0% |
| Income Tax | -£1,746 | 34.9% |
| National Insurance | -£227 | 4.5% |
| Student Loan | -£450 | 9.0% |
| Net Bonus | £2,577 | 51.5% |
Without Bonus
£693
With £5,000 Bonus
£1,143
+£450 extra
Important: This extra deduction doesn't result in overpayment if your total annual income remains consistent. It's just the timing of when the repayment is collected.
Why the spike: Student loan repayments are calculated on each pay period's income. A bonus pushes your period income well above the threshold, triggering a higher deduction.
No overpayment: If your annual income stays consistent, this extra deduction simply means you're paying your annual liability earlier rather than overpaying.
Effective rate: Your bonus faces an effective tax rate of 4845.5%including income tax, National Insurance, and student loan repayments.
Planning tip: If you regularly receive bonuses, consider the impact on cash flow and budget for the higher deductions in those months.
On a £35,000 salary with Plan 2, your normal monthly student loan repayment would be £58. However, when you receive a £5,000 bonus, the total deduction jumps to £508for that period - an extra £450.
This happens because your combined income for that period (£7,917) significantly exceeds the monthly threshold of £2,275.
If you're concerned about student loan deductions or think you might be overpaying, contact the Student Loans Company or speak with your payroll department.