Plan 5 mechanics (2026/27)
- Threshold: £25,000 per year
- Rate above threshold: 9%
- Calculation: per pay period through PAYE
Monthly threshold: £25,000 / 12 = £2,083.33 Weekly threshold: £25,000 / 52 = £480.77
Standard PAYE: 9% on earnings above the period threshold each pay period, rounded DOWN to the nearest pound.
Who has Plan 5
Plan 5 applies to:
- Anyone starting higher education in England or Wales from September 2023 onward
Welsh students at universities anywhere in the UK use Plan 5 if their start date is 2023+. Scottish students continue using Plan 4 (SAAS). Northern Irish students continue using Plan 1.
The first Plan 5 graduates will become repayable in April 2027 (those who started 3-year courses in 2023 and graduated 2026). Numbers of active Plan 5 borrowers will grow rapidly through the late 2020s.
Worked example — Plan 5 on £28,000
Annual: - Above £25,000 = £3,000 - 9% × £3,000 = £270/year
Monthly: £22-23 deduction. Above the threshold even at relatively modest earnings.
Worked example — Plan 5 on £40,000
Annual: - Above £25,000 = £15,000 - 9% × £15,000 = £1,350/year
Monthly: £112. Combined with Income Tax + NI on £40k, total deductions roughly £790/month.
Plan 5 vs Plan 2 — comparing thresholds
| Salary | Plan 5 (above £25,000) | Plan 2 (above £28,470) | Plan 5 paying extra |
|---|---|---|---|
| £25,000 | £0 | £0 | £0 |
| £28,000 | £270 | £0 | £270 |
| £30,000 | £450 | £138 | £312 |
| £35,000 | £900 | £588 | £312 |
| £50,000 | £2,250 | £1,938 | £312 |
Above £28,470, Plan 5 borrowers pay roughly £312/year more than Plan 2 borrowers on the same salary (£3,470 of additional income captured by the lower threshold × 9% = £312.30). The differential is constant — both plans deduct 9% above their respective thresholds.
Over 40 years vs 30 years, this differential compounds substantially. Government modelling suggests Plan 5 borrowers will repay materially more over the loan lifetime than the average Plan 2 borrower.
Plan 5 interest
- Interest charged at RPI (Retail Price Index) only
- No income-linked margin (unlike Plan 2 which goes up to RPI + 3%)
- Updated annually by Student Loans Company
For the foreseeable future, Plan 5 interest is meaningfully lower than Plan 2 for any year RPI is below 3%. In high-RPI years, both plans see substantial interest accrual.
The lower interest combined with the lower threshold and longer term creates a different repayment shape than Plan 2: more borrowers paying, often for longer, with less aggressive interest compounding.
Salary sacrifice optimisation for Plan 5
The pension-sacrifice lever is the same as Plan 2 — and at the £25,000 threshold, even small sacrifices can eliminate the deduction:
Example: £26,500 salary, Plan 5 borrower
Without sacrifice: - Above £25,000 = £1,500 × 9% = £135/year student loan
With 6% sacrifice (£1,590): - Threshold-relevant income: £24,910 - Below £25,000 → £0 student loan
The £1,590 sacrifice puts £1,590 in pension, saves £135 in student loan, plus ~£440 Income Tax + NI saved. Net cost to take-home: roughly £1,000.
This makes pension sacrifice unusually attractive for entry-level workers on Plan 5 between £25k–£32k.
When Plan 5 writes off
40 years from the April you first became repayable. The first Plan 5 graduates will see write-off in 2067 (for 2023 starters who graduate 2026 and become repayable April 2027).
This 40-year term is longer than any previous UK student loan plan and reflects the government's decision to extend the repayment window to capture more lifetime income.
Read more about write-off rules →
Plan 5 + PGL
Postgraduate Loan applies to Plan 5 borrowers who go on to postgrad study:
| Salary | Plan 5 (9% above £25,000) | PGL (6% above £21,000) | Total |
|---|---|---|---|
| £25,000 | £0 | £240 | £240 |
| £35,000 | £900 | £840 | £1,740 |
| £45,000 | £1,800 | £1,440 | £3,240 |
| £60,000 | £3,150 | £2,340 | £5,490 |
Both run in parallel. Combined deductions can be substantial — the £35k example takes nearly 5% of gross.
Voluntary early repayment
For Plan 5 specifically, voluntary repayment is more often value-positive than for Plan 2:
- Lower interest (RPI only) means less compounding
- More borrowers project to repay in full, so reducing balance does reduce lifetime cost
- 40-year term means cash flow optimisation is meaningful
That said, money invested in pension or low-cost index funds typically returns more than the RPI-only interest avoided. Specific to circumstances; not advice.
In short
Plan 5 is the current UK student loan plan for 2023+ E&W starters. Threshold £25,000 (lowest of any plan), 9% rate, 40-year write-off, RPI-only interest. Most populous future plan. Use the take-home calculator → to model. For the full reference, see the student loans hub →.