Plan 5 Student Loans: What You'll Actually Repay

9% of everything you earn over £25,000

Plan 5 — the loan for students in England who started courses from August 2023 — takes 9% of your income above £25,000 a year. On a £40,000 salary that is £1,350 a year, or £112.50 a month, leaving take-home pay of about £30,970 (£2,581 a month) after tax, National Insurance, and the loan.

The first Plan 5 borrowers made their first-ever repayments in April 2026, so 2026/27 is the first full tax year these deductions appear on payslips.

Repayments at common salaries

Salary	Plan 5 (per year)	Plan 5 (per month)	Plan 2 (per year)
£30,000	£450	£37.50	£55
£35,000	£900	£75.00	£505
£40,000	£1,350	£112.50	£955
£50,000	£2,250	£187.50	£1,855

Both plans charge the same 9% rate — the difference is where repayment starts. Plan 5’s threshold is £25,000, held at that level for 2026/27; Plan 2’s is £29,385. That £4,385 gap is worth £395 a year at every salary above both thresholds, and it bites hardest at the bottom: at £30,000, a Plan 5 graduate repays £450 a year while a Plan 2 graduate repays £55 — roughly eight times as much for the newer cohort.

For take-home pay before the loan at any salary, see the UK take-home table; the £30,000 with a Plan 2 loan breakdown shows the older plan’s deductions line by line.

How Plan 5 works

Repayments behave like a tax, not like a normal loan:

• Automatic: deducted through PAYE alongside income tax and NI. You never choose the amount.
• Income-contingent: earn below £25,000 in a pay period and the deduction stops. Nothing accrues as “missed”.
• 9% above the threshold only: a £1,000 pay rise above £25,000 costs £90 a year in extra repayments, regardless of your balance.
• Written off after 40 years: per GOV.UK, any balance left 40 years after the April you were first due to repay is cancelled — for the first cohort, that means the mid-2060s.

Plan 5 vs Plan 2: the real trade

Plan 5 is a deliberately different bargain from Plan 2 (England and Wales courses starting September 2012 to July 2023):

• You pay from a lower salary — £25,000 vs £29,385 — so monthly deductions start earlier in your career and are larger at every income level.
• You pay for longer — the write-off moved from 30 years to 40, stretching repayments across most of a working life.
• But interest is gentler — Plan 5 charges RPI only, with no added percentage on top, unlike Plan 2’s income-linked RPI-plus-up-to-3% (GOV.UK). Balances still grow with inflation, but they no longer compound ahead of it.

The net effect: more Plan 5 borrowers will repay their loans in full, and fewer will reach the write-off — that is what a lower threshold and a 40-year term are designed to do.

What it does to your marginal rate

Stack the deductions and a Plan 5 graduate in the basic-rate band loses 37p of each extra pound: 20% income tax, 8% National Insurance, 9% loan. In the higher-rate band it is 51p (40% + 2% + 9%). That is worth knowing when you weigh up a pay rise — a £1,000 rise at £30,000 with a Plan 5 loan is £630 in your pocket, not £720. What a pay rise is actually worth runs those numbers without a loan for comparison.

Whether voluntary overpayments make sense depends on the same question as Plan 2, stretched over a longer horizon: will your lifetime earnings clear the balance before the 40-year write-off? High and rising earners save real interest by overpaying; for others, the write-off does the work and overpayments are money gone. That depends on your career path, not a rule of thumb.

See your exact payslip with a Plan 5 loan — alongside tax codes, pension contributions, and Scottish rates — in the UK Salary Calculator.