If you took a master's on top of your undergraduate degree, you may be repaying a Plan 2 loan and a Postgraduate loan at the same time — 9% above £29,385 and 6% above £21,000. Together they can strip up to 15% of a pay rise before income tax and National Insurance, pushing the marginal rate on your next £1,000 to 43%. This calculator shows both deductions separately and combined.
6 min read·Updated Wed Aug 19 2026 00:00:00 GMT+0000 (Coordinated Universal Time)·🇬🇧 UK
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Key takeaways
Key takeaways · 2026/27
A Plan 2 loan repays 9% above £29,385; a Postgraduate loan repays 6% above £21,000.
Both are assessed on income above their own threshold, so above £29,385 they stack to a 15% combined deduction.
Stacked on 20% basic-rate tax and 8% National Insurance, the marginal rate on your next £1,000 is 43%.
Yes — you can and do repay two loans at once; a postgraduate loan never replaces the undergraduate one.
How it works
Two loans, two thresholds, one payslip
A growing number of graduates finish a master's owing two income-contingent loans: the Plan 2 loan for their undergraduate degree and a separate Postgraduate loan. Payroll collects both at once, each assessed on income above its own threshold:
Loan
Rate
Threshold (2026/27)
Deduction on £40,000
Plan 2 (undergraduate)
9%
£29,385
£955 / yr
Postgraduate (master's / doctoral)
6%
£21,000
£1,140 / yr
Combined
up to 15%
—
£2,095 / yr
Because each loan is charged on income above its own threshold, once you earn more than £29,385 both are running at full rate — a combined 15% marginal deduction on every extra pound, before a penny of tax or National Insurance.
The 43% marginal rate: between £29,385 and £50,270 you pay 20% income tax + 8% National Insurance + 9% Plan 2 + 6% Postgraduate = 43% of every extra pound. A £2,000 pay rise in that band adds only about £1,140 to your take-home. Cross into the 40% band and the marginal rate rises to 55%.
Worked example: a £2,000 pay rise on £40,000
Move from £40,000 to £42,000 and the extra £2,000 is taxed at 20% (£400), hit with 8% NI (£160), 9% Plan 2 (£180) and 6% Postgraduate (£120). That is £860 gone, leaving about £1,140 in your pocket — a 43% marginal deduction. The loan repayments are the part most calculators ignore, which is why a raise can feel smaller than expected.
None of this means the loans are "extra tax" you will pay forever — they are income-contingent and are written off after 30 years. But while you are repaying, they materially change the value of a raise or a bonus, so it is worth seeing the true figure. If your undergraduate loan is the newer Plan 5 instead of Plan 2, tick Plan 5 in the calculator above to model that combination.
Yes. A Postgraduate (master's or doctoral) loan is entirely separate from your undergraduate loan and is collected on top of it, not instead of it. If you are on Plan 2 for your degree and also have a Postgraduate loan, PAYE deducts 9% above £29,385 for Plan 2 and 6% above £21,000 for the Postgraduate loan in the same pay period. They are assessed independently, each on income above its own threshold.
What is my marginal rate with a Plan 2 and a postgraduate loan?
Once your salary is above both thresholds and inside the basic-rate band, every extra £1,000 loses 20% to income tax, 8% to National Insurance, 9% to Plan 2 and 6% to the Postgraduate loan — a combined 43% marginal deduction. So a £1,000 pay rise adds only about £570 to your take-home. Cross into the 40% higher-rate band and the marginal rate jumps to 55% (40% + 2% NI + 9% + 6%).
How much are the combined repayments on £40,000?
On £40,000 the Plan 2 deduction is 9% × (£40,000 − £29,385) = £955 a year, and the Postgraduate deduction is 6% × (£40,000 − £21,000) = £1,140 a year. Combined that is £2,095 a year, about £175 a month, on top of your income tax and National Insurance. The calculator above shows both lines and the total for your own salary.
Which loan gets paid off first?
Neither is prioritised through payroll — both are deducted every period until each is cleared or written off. They have different write-off periods (Plan 2 after 30 years, the Postgraduate loan after 30 years from the April you were first due to repay), and interest accrues separately. Because both are income-contingent, overpaying only makes sense if you are confident you will clear the balance before write-off.
Does a bonus make the combined deduction worse?
A bonus is treated as ordinary income, so it is subject to the same 9% + 6% loan deductions plus tax and NI in the period it is paid. Because it stacks on top of your salary it can also push part of the bonus into the 40% band, taking the marginal rate to 55%. See the bonus and emergency-tax calculator for how a lump sum lands in your pay.
Disclaimer: Figures are estimates based on 2026/27 rates and rules and may change. Verify with HMRC or a qualified adviser before making financial decisions.