UK Student Finance Plan 5 Repayment Rules & Calculator Guide 2026

1. What Is a Plan 5 Student Loan?

Plan 5 is the income-contingent repayment plan introduced for eligible students starting undergraduate courses in England from 1 August 2023. Plan 5 also applies to certain other education loans covered by the Plan 5 repayment framework. This guide focuses specifically on Plan 5 undergraduate student loans in England. Plan 5 differs materially from Plan 2. The repayment threshold is lower, the repayment rate remains 9%, the normal interest rate is RPI rather than Plan 2's RPI-plus-variable-rate structure, and the repayment term is 40 years from the Statutory Repayment Due Date (SRDD).

2. Plan 5 Repayment Threshold for 2026–27

From 6 April 2026, the Plan 5 annual repayment threshold is £25,000. For payroll purposes, this corresponds to: • £25,000 per year • £2,083.33 per month • £480.76 per week If earnings for a particular pay period are at or below the applicable threshold, no Plan 5 deduction is made for that pay period through PAYE. The annual threshold should not be interpreted as a simple annual tax-style calculation performed retrospectively at the end of the tax year. PAYE deductions are normally calculated using the threshold for the relevant pay period.

3. How the 9% Plan 5 Repayment Is Calculated

Plan 5 repayments are 9% of earnings above the applicable repayment threshold. For a simple annual illustration: Annual repayment = 9% × (annual income − £25,000) This formula is useful for estimating the annual repayment amount. However, actual PAYE deductions use the relevant weekly or monthly threshold and are rounded down to the nearest whole pound under HMRC payroll rules. For 2026–27, the official PAYE thresholds are £480.76 per week and £2,083.33 per month.

4. 2026–27 Monthly PAYE Examples

The following examples use the 2026–27 monthly PAYE threshold of £2,083.33 and the 9% repayment rate. Actual payroll deductions are rounded down to the nearest whole pound. Example 1 – £28,000 annual salary: Approximate monthly gross pay = £2,333.33. Excess over monthly threshold = £250.00. 9% = £22.50. PAYE deduction after rounding down = £22 per month. Example 2 – £35,000 annual salary: Approximate monthly gross pay = £2,916.67. Excess over monthly threshold = £833.34. 9% = approximately £75. PAYE deduction = £75 per month. Example 3 – £50,000 annual salary: Approximate monthly gross pay = £4,166.67. Excess over monthly threshold = £2,083.34. 9% = approximately £187.50. PAYE deduction after rounding down = £187 per month. These are PAYE illustrations. Actual deductions can differ where pay varies between pay periods, bonuses are received, or another repayment-plan interaction applies.

5. Why the Annual Formula and PAYE Deduction Can Differ

A calculator that simply takes annual income above £25,000 and divides the result by 12 may produce a slightly different figure from an actual payroll deduction. HMRC payroll rules use the relevant pay-period threshold and instruct employers to multiply the excess by 9% and round the result down to the nearest whole pound. For example, £28,000 annual income gives a simple annual calculation of £270 per year, but monthly PAYE deductions can be £22 in each month, producing £264 if the same monthly pay is received throughout the year. Therefore, the page should distinguish between an annual repayment estimate and the actual PAYE deduction mechanism.

6. When Do Plan 5 Repayments Start?

Plan 5 borrowers are not expected to make repayments until the applicable Statutory Repayment Due Date (SRDD) and until their income is above the repayment threshold. For most borrowers, the SRDD is 6 April after they complete or withdraw from their course. The first possible SRDD for Plan 5 borrowers was April 2026. If a borrower leaves a course before completing it, the relevant SRDD can still arise under the statutory rules. Repayment liability and the date interest begins are separate concepts: interest can accrue while the loan is outstanding before repayments become due.

7. How Is Plan 5 Interest Calculated?

Plan 5 interest is normally set at the Retail Price Index (RPI). The rate is normally set annually from 1 September using the applicable RPI measure, but a Prevailing Market Rate cap can apply if the commercial-market comparison requires a lower rate. For the period from 1 September 2025 to 31 August 2026, the applicable Plan 5 interest rate is 3.2%. Therefore, the statement 'Plan 5 always charges exactly RPI with no possible adjustment' is too absolute. The correct description is RPI subject to the prevailing-market-rate cap.

8. Does Plan 5 Have the Extra 3% Interest Used by Plan 2?

No. Plan 5 does not use the Plan 2 RPI-plus-up-to-3% interest structure. Plan 5 normally uses RPI, subject to the prevailing-market-rate cap. For example, the applicable rate for Plan 5 from 1 September 2025 to 31 August 2026 is 3.2%, while the applicable Plan 2 structure is different. This is one of the significant differences between Plan 5 and Plan 2.

9. When Is a Plan 5 Loan Cancelled?

A remaining Plan 5 balance is cancelled after 40 years from the borrower's Statutory Repayment Due Date, subject to the applicable cancellation rules. The SRDD is normally 6 April after the borrower completes or withdraws from the course. Therefore, it is inaccurate to describe the rule simply as '40 years after course end date.' The 40-year period is measured from the SRDD. Other cancellation events can also apply, including death and certain permanent-unfitness circumstances under the student-loan rules.

10. What Happens If Income Falls Below £25,000?

If a borrower's earnings are below the applicable repayment threshold for a pay period, no mandatory Plan 5 PAYE deduction is normally made for that pay period. If income subsequently rises above the threshold, deductions can resume. This does not mean interest stops. Interest can continue to be added to the outstanding loan balance even when the borrower is below the repayment threshold.

11. Plan 5 and Self-Employed Borrowers

PAYE is not the only repayment collection method. Borrowers who are self-employed generally deal with student loan repayments through Self Assessment. The calculation is based on the applicable student loan rules and taxable income rather than simply using an employer payroll deduction. A person can also have employment income and self-employed income, in which case the relevant HMRC and Student Loans Company rules determine how repayments are calculated.

12. Plan 5 and Overseas Borrowers

Plan 5 borrowers who live overseas are still subject to repayment obligations. The Student Loans Company publishes country-specific overseas repayment thresholds for each tax year. These thresholds can differ from the UK £25,000 threshold because they are adjusted for the cost of living in the relevant country. For 2026–27, the official overseas Plan 5 thresholds and fixed monthly repayment amounts are published by the Student Loans Company and should be checked by country rather than applying the UK threshold universally.

13. Do Plan 5 Student Loans Affect Your Credit Score?

UK government-backed student loans do not operate like ordinary commercial loans for UK credit-reporting purposes. MoneyHelper states that student loans do not affect your credit score and do not appear on credit files. However, a mortgage lender or other lender can ask about student-loan obligations when assessing affordability. This is different from the loan appearing as a normal credit account on your credit file.

14. Can You Make Voluntary Plan 5 Repayments?

Yes. Plan 5 borrowers can make additional voluntary repayments to the Student Loans Company. A voluntary payment is separate from the compulsory income-contingent repayment collected through PAYE or Self Assessment. Before making a large voluntary repayment, borrowers should consider the expected repayment period, interest rate, likelihood of reaching the cancellation point and their other financial priorities.

15. Plan 5 Compared With Plan 2

Plan 5 and Plan 2 differ in several important ways. Plan 5 uses a £25,000 repayment threshold for 2026–27, compared with the £29,385 Plan 2 threshold from April 2026. Both plans use a 9% repayment rate above the applicable threshold. Plan 5 normally uses RPI interest subject to the prevailing-market-rate cap, while Plan 2 uses a different variable interest-rate structure. Plan 5 has a 40-year repayment term from SRDD, whereas Plan 2 has a 30-year repayment term from SRDD.

Key Takeaways & Summary

• Plan 5 applies to undergraduate students starting courses in England from August 2023 onwards.
• Repayments begin when gross income exceeds £25,000 per year (£2,083 per month).
• You pay 9% of your gross earnings above the £25,000 threshold through PAYE.
• Interest accumulates at RPI inflation only (no additional 3% surcharge).
• Remaining balance is written off after 40 years.

Official References & Related UK Hubs

Frequently Asked Questions (6 Interlinked FAQs)