Minimum wage graduates on overtime face paying student loan tax

Minimum wage graduates on overtime face paying student loan tax

Due to rises in the minimum wage coming in April 2025, some graduates working non-graduate minimum wage jobs may be pulled into paying their student loans back after earning over the threshold.

The current threshold depends on what type of student loan was taken out originally, but most will begin to pay 9% on any earnings over £25,000.

The national minimum wage for over 21s is increasing by 6.7% from April, reaching a record high of £12.21 per hour. Although a full-time position would not drag anyone into repaying their student loan, working regular overtime could.

This means that any graduate with a plan 1 student loan working 42 hours per week over the course of the tax year would earn approximately £26,660 per annum, and this figure ignores any extra payments they might receive such as overtime, which would also be earnings for student loan purposes.

This could then lead to graduates finding it even harder to find a graduate job after leaving education, due to companies having to increase their entry level wages, meaning more experienced staff will begin requesting further increases.

There are also concerns that the increase in employers’ national insurance from April will also hit younger workers and new graduates.