Plan 5 Becomes the New Default for Student Loan Deductions from April 2026
UK employers are being urged to prepare for significant changes to student loan repayments as a new repayment plan—Plan 5—takes effect from 6 April 2026, marking its first year of deductions through the PAYE system.
Introduced for students in England who began undergraduate courses, PGCE programmes, or Advanced Learner Loans on or after 1 August 2023, Plan 5 features a lower annual repayment threshold of £25,000 compared to existing plans. This means more graduates will start repaying earlier in their careers, with deductions at the standard rate of 9% on earnings above this level.
HM Revenue and Customs (HMRC) has reminded employers that they will begin receiving Student Loan Start Notices (SL1) from March 2026. These notices will specify the relevant plan type—including the new Plan 5—for employees entering repayment from April onwards. The notices will cover both new Plan 5 borrowers and any existing borrowers switching to the plan.
To support the rollout, the Starter Checklist (both online and PDF versions) will be updated in March 2026 to include Plan 5 as an option. Employers are advised to direct any uncertain employees to log into their online Student Loans Company account to check their plan type, or to refer them to official guidance on managing their student loan balance.
A key change affects how employers handle uncertainty: Until 5 April 2026, if the correct plan is unclear, employers should default to Plan 1. However, from 6 April 2026, the default switches to Plan 5. In cases where an employee has multiple plans, deductions should begin with the plan that has the lowest repayment threshold.
The updated annual repayment thresholds for the 2026-27 tax year are as follows:
- Plan 1: £26,900
- Plan 2: £29,385
- Plan 4: £33,795
- Plan 5: £25,000
- Postgraduate loans: £21,000
Deduction rates remain unchanged at 9% for Plans 1, 2, 4, and 5 (on earnings above the respective thresholds), and 6% for postgraduate loans.
HMRC’s guidance for employers on student and postgraduate loan repayments will be fully updated on 6 April 2026 to reflect these changes. Employers are encouraged to update payroll systems in advance and monitor incoming notices carefully to avoid errors, especially for employees already repaying under another plan who may transition to Plan 5.
These adjustments aim to align deductions with the new structure for recent graduates while maintaining consistency in collection processes. For the latest official details, employers and employees should consult GOV.UK or the Student Loans Company website