How PAYE deductions work
PAYE is the system employers use to deduct Income Tax from wages. National Insurance and student loan repayments are also taken through payroll, but each deduction uses separate thresholds and rules.
Student loan plans
Repayment thresholds depend on the loan plan. Plans 1, 2, 4 and 5 generally use a 9% repayment rate above their threshold, while postgraduate loans use a separate 6% rate. The correct plan is normally shown in Student Loans Company records.
Pension contributions and student loans
Salary sacrifice can reduce the earnings used for some payroll deductions, while relief-at-source pension contributions work differently. The exact effect depends on the pension arrangement used by the employer.