Complete breakdown of April 2025 repayment threshold changes and impact on your monthly payments
From April 6, 2025, student loan repayment thresholds have been adjusted across all active loan plans affecting millions of borrowers. These annual threshold changes determine the income level at which you begin repaying your loans and directly impact monthly deduction amounts. Understanding the new thresholds for your specific loan plan is essential for budgeting and financial planning as PAYE deductions automatically adjust from your April 2025 payslip onwards.
The Department for Education announced these changes in March 2025 following standard annual review processes. Threshold adjustments typically reflect wage growth and inflation to maintain real-terms repayment burdens, though political decisions sometimes result in freezes or below-inflation increases reducing the effective threshold in real terms. This year's adjustments vary significantly by plan with some borrowers seeing meaningful increases while others face minimal changes creating divergent impacts across the borrower population.
This guide provides complete analysis of April 2025 threshold changes including exact new thresholds for every active loan plan, monthly payment impact calculations at different salary levels, implementation timeline explaining when changes take effect, overseas threshold adjustments for borrowers living abroad, and action required from borrowers. Whether you are in PAYE employment, self-employed, or living overseas, these changes affect your repayment obligations starting this tax year.
The 2025-26 tax year brings threshold adjustments driven by wage growth measured through Average Weekly Earnings data for the period to September 2024. Overall wage growth of four point two percent informed threshold calculations though actual increases vary by plan.
| Loan Plan | Previous Threshold | New Threshold | Change |
|---|---|---|---|
| Plan 1 | £22,015 | £24,990 | +£2,975 (13.5%) |
| Plan 2 | £27,295 | £28,470 | +£1,175 (4.3%) |
| Plan 4 | £31,395 | £32,260 | +£865 (2.8%) |
| Plan 5 | £25,000 | £25,000 | Frozen |
| Postgraduate | £21,000 | £21,000 | Frozen |
Plan 1 receives largest percentage increase at thirteen point five percent reflecting catch-up adjustment after several years of frozen thresholds. This significant increase means Plan 1 borrowers earning under twenty-five thousand pounds will make zero repayments in 2025-26 compared to making repayments if earning over twenty-two thousand pounds previously. For Plan 1 details, see our comprehensive guide.
Plan 2 threshold increases by four point three percent matching approximate wage growth maintaining real-terms repayment burden. Someone earning thirty-five thousand pounds will see monthly repayments decrease by approximately nine pounds due to higher threshold creating small but tangible benefit.
Plan 5 and Postgraduate loan thresholds remain frozen at twenty-five thousand pounds and twenty-one thousand pounds respectively. With inflation running above two percent, this freeze represents real-terms threshold reduction meaning borrowers effectively start repaying at lower real income levels. Government confirmed this freeze is intentional policy to increase repayment collections from newer borrowers.
These 2025 threshold changes continue pattern of differential treatment across loan plans. Plan 1 has experienced several years of freezes followed by significant catch-up increases. Plan 2 has seen relatively consistent inflation-linked increases since threshold reached twenty-seven thousand two hundred ninety-five pounds in 2021. Plan 5 was explicitly designed with frozen twenty-five thousand pound threshold for first several years regardless of wage growth, making this freeze expected rather than surprising. For legislative background, see our parliamentary changes guide.
Detailed analysis of how April 2025 threshold changes affect monthly repayments at different income levels for each loan plan.
Plan 2 threshold increases from twenty-seven thousand two hundred ninety-five pounds to twenty-eight thousand four hundred seventy pounds, an increase of one thousand one hundred seventy-five pounds. Repayment rate remains nine percent on income above threshold. For someone earning exactly thirty-five thousand pounds, monthly repayment decreases from fifty-eight pounds to forty-nine pounds, saving nine pounds monthly or one hundred eight pounds annually.
Monthly Payment Examples (Annual Salary → Monthly Deduction):
£30,000 → £11.48 (was £20.26, saves £8.78/month)
£35,000 → £48.98 (was £57.76, saves £8.78/month)
£40,000 → £86.48 (was £95.26, saves £8.78/month)
£50,000 → £161.48 (was £170.26, saves £8.78/month)
Plan 5 threshold remains at twenty-five thousand pounds with no increase. This is second consecutive year of freeze since Plan 5 introduction in September 2023. With inflation around two point five percent, real threshold has declined by approximately five percent since introduction. Repayment rate remains nine percent. Someone earning thirty thousand pounds continues paying thirty-seven pounds fifty pence monthly with no reduction despite wage growth.
Government policy states Plan 5 threshold will remain frozen until at least 2027-28 academic year, representing minimum three years without adjustment. This intentional policy aims to increase lifetime repayment amounts from Plan 5 borrowers who benefit from lower RPI-only interest compared to Plan 2 borrowers. The trade-off is lower threshold partially offsetting reduced interest costs.
Postgraduate loan threshold remains frozen at twenty-one thousand pounds where it has stayed since 2021. Repayment rate remains six percent on income above threshold. This freeze particularly affects postgraduate borrowers as threshold sits well below typical graduate starting salaries meaning most postgraduate loan holders make repayments immediately upon employment.
Someone with both Plan 2 undergraduate and postgraduate loans earning thirty-five thousand pounds pays combined monthly repayments of ninety-eight pounds forty-eight pence, split between forty-eight pounds ninety-eight pence for undergraduate and forty-nine pounds fifty pence for postgraduate. The Plan 2 threshold increase saves eight pounds seventy-eight pence monthly but postgraduate freeze means no savings on that portion. For combined loan strategies, see our multiple degrees guide.
Understanding your specific payment change requires calculating based on your exact salary and loan plan. These examples show typical scenarios.
Consider Sarah with Plan 2 loan who received four percent salary increase from thirty-four thousand pounds to thirty-five thousand three hundred sixty pounds. Previous threshold of twenty-seven thousand two hundred ninety-five pounds meant monthly repayment of fifty pounds thirty-two pence on thirty-four thousand pounds salary. With new salary and new threshold, monthly repayment is fifty-one pounds sixty-eight pence, an increase of only one pound thirty-six pence despite one thousand three hundred sixty pound salary increase.
Without threshold increase, her new salary would have triggered monthly repayment of sixty pounds fifty pence, meaning the threshold increase saves her eight pounds eighty-two pence monthly or one hundred five pounds eighty-four pence annually. This demonstrates how threshold increases partially offset the impact of salary growth on student loan repayments, preventing repayments from rising as sharply as gross income.
For personalized payment calculations using the new 2025-26 thresholds, use our repayment calculator. Enter your current or expected salary, select your loan plan, and the calculator automatically uses April 2025 thresholds showing exact monthly and annual deductions. The calculator also projects lifetime repayment amounts under various salary growth scenarios accounting for future threshold changes and write-off dates.
New thresholds take effect from April 6, 2025, the start of the 2025-26 tax year. Implementation varies by employment status and location.
HMRC automatically updates employer PAYE systems with new thresholds effective from April 6 pay period. Your employer receives updated tax codes and student loan indicators showing new threshold amounts. First payslip processed after April 6 reflects new threshold. For most monthly-paid employees, this means April salary paid at end of April uses new threshold.
No action required from employees. HMRC notifies employers who implement changes automatically. Check your April payslip to confirm deduction calculations use twenty-eight thousand four hundred seventy pounds threshold for Plan 2, twenty-five thousand pounds for Plan 5, and twenty-one thousand pounds for postgraduate loans. If payslip shows incorrect threshold, contact your payroll department as this indicates employer system not updated correctly.
Self-employed borrowers declare income on Self Assessment tax returns. New thresholds apply to 2025-26 tax year income declared on returns filed by January 2027. Student Loans Company calculates repayments due based on total annual income above new thresholds with payment demanded in lump sums after tax return processing.
Overseas borrowers receive updated income assessment forms in May 2025 requesting declaration of overseas income for 2024-25 tax year. Those forms use previous year thresholds. Next year assessment in 2026 will use new 2025-26 thresholds for income earned during current tax year. Overseas thresholds differ from UK thresholds adjusted for local cost of living. For overseas obligations, see our moving abroad guide.
Most borrowers need take no action as threshold changes implement automatically. However, certain scenarios require attention to ensure correct deductions.
Review your first post-April-6 payslip carefully. Confirm student loan deduction matches expected amount based on new threshold for your plan. Common errors include employer using previous threshold, wrong plan threshold applied, or deductions continuing when salary now below threshold. If deduction appears incorrect, contact payroll immediately with evidence of correct threshold from official government sources.
Calculate expected deduction yourself. Take annual salary, subtract new threshold for your plan, multiply remainder by nine percent for undergraduate loans or six percent for postgraduate loans, divide by twelve for monthly amount. Compare this to payslip deduction. Small differences may occur due to rounding or PAYE calculation methods but deductions should be close to your manual calculation.
Adjust your monthly budget to reflect changes in take-home pay. Plan 2 borrowers see slight increase in take-home pay from reduced deductions. Plan 5 and postgraduate borrowers see no change from threshold freeze but should account for real-terms increase in deduction burden as salaries rise with inflation while threshold remains static. Use our combined repayment calculator for updated projections incorporating new thresholds.
Plan 2 borrowers benefit from modest threshold increase reducing monthly repayments by approximately nine pounds at typical salaries. Plan 5 and postgraduate borrowers face continued threshold freeze increasing real-terms repayment burden as wages rise. These divergent adjustments reflect broader policy of maintaining higher collections from newer borrowers while providing some relief to older loan cohorts. Monitor your payslip to confirm correct implementation and adjust financial planning accordingly.
For more updates, see our guides on interest rate changes and Budget 2025 announcements.
UK Education Policy Specialist
With over 15 years of experience in UK education policy and student finance, Dr. Sharma founded Student Loan Calculator UK to help students navigate the complex world of student loans.