What Is Plan 5?
Plan 5 is a new student loan repayment plan introduced 6 April 2026. Borrowers under this plan must begin repayments once their earnings exceed a specific threshold. Employers will receive new start notices informing them of the plan type and applicable threshold. (gov.uk)
The 2026-27 Thresholds & Rates
| Loan Plan | Earnings Threshold | Repayment Rate |
|---|---|---|
| Plan 1 | £26,900 | 9% of earnings above threshold |
| Plan 2 | £29,385 | 9% |
| Plan 4 | £33,795 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
Rates for plans 1, 2, 4 & 5 remain at 9%; postgraduate repayments continue at 6%. (gov.uk)
Who Is Affected & When
- All new Plan 5 borrowers entering repayment from 6 April 2026.
- Employers/Payroll Agents will receive notifications about which plan employees are on starting March 2026. (gov.uk)
- Employees unsure of which plan to repay under until informed should use Plan 1 by default until proper start notice arrives. (gov.uk)
Compliance Steps for Employers & Agents
- Update payroll systems to handle Plan 5 with its lower threshold of £25,000.
- Monitor start notices: beginning in March 2026, to identify plan types for employees.
- Include plan type in pay records, so deductions are correct. If employees hold multiple plans, workplace default should be lowest threshold until notice arrives.
- Communicate to staff: proactively explain changes so employees aren’t surprised by deductions.
Example Scenario
Tom earns £30,000/year and holds a Plan 5 loan starting 6 April 2026. He’s above threshold (£25,000), so his deductible repayments will be 9% of £5,000 = £450/year. Employer deducts through payroll accordingly. If no start notice received by Tom yet, employer should use Plan 1 default until notified.
Why It Matters
The lower earning threshold for Plan 5 means employees with lower income will begin repayments sooner. Employers must adjust systems and ensure correct plans to avoid over/under deductions. For employees, knowing your plan type helps with budgeting.
Actionable Takeaways
- Employers: test payroll software and worker classification modules well ahead.
- Employees: check loan account for plan type; if plan type includes multiple loans, watch thresholds.
- Agents/Advisers: help clients review pay slips and ensure correct deductions from April 2026.