Why Is Plan 5 Taking That Much From My Payslip? (2026 Cohort Guide)
7 min read Article Updated 2026-05-25
If you started a UK undergraduate course in or after August 2023, you are on Plan 5, and the maths is harsher than it was for the Plan 2 graduates ahead of you. Plan 5 takes 9% of every pound you earn above £25,000 a year, which is well below the Plan 2 threshold of £29,385. That gap is the whole story of why your payslip looks different.
What this means for you in one line. On a £30,000 salary, Plan 5 deducts about £37.50 a month at source. A Plan 2 graduate on the same salary pays £4.61. Same job, same payslip, more than eight times the deduction, because the threshold is set lower by design.
Why Plan 5 hits earlier and lower than Plan 2
Plan 5 is the repayment plan for English-domiciled students who started an undergraduate course, a PGCE, or took out an Advanced Learner Loan on or after 1 August 2023. The headline numbers are simple and worth memorising, because they explain everything else.
- Repayment threshold: £25,000 a year.
- Repayment rate: 9% of income above the threshold.
- Loan term: 40 years from the first April you are due to repay, then any balance is written off.
- Interest rate: 3.2%, fixed at RPI, with no markup for higher earners.
The lower threshold is the lever the policy was designed around. Bringing it down from £29,385 (Plan 2) to £25,000 pulls more graduates into repayment, and pulls them in at a 9% slice of a wider band of their income. The 40-year term then keeps the meter running long enough that more borrowers repay the loan in full rather than seeing it written off. Plan 5 is a quieter policy reform than the previous decade's fee changes, but in lifetime-cost terms it is the bigger shift for English graduates.
What gets deducted at £28,000, £32,000, and £40,000
The formula is the same at every salary: 9% of the amount you earn above £25,000 a year. PAYE applies it monthly on whatever you earned in that month, not on your annual total, so a one-off bonus pulls a bigger slice than a steady salary at the same yearly figure. Three worked examples on a steady salary:
At £28,000 a year. You earn £3,000 above the threshold. 9% of that is £270 over the year, or £22.50 a month at source. A Plan 2 graduate on the same salary pays nothing because £28,000 is below the £29,385 Plan 2 threshold.
At £32,000 a year. You earn £7,000 above the threshold. 9% of that is £630 over the year, or £52.50 a month. A Plan 2 graduate on the same salary pays £19.61 a month. Plan 5 takes nearly three times as much.
At £40,000 a year. You earn £15,000 above the threshold. 9% of that is £1,350 over the year, or £112.50 a month. A Plan 2 graduate on the same salary pays £79.61 a month. The gap narrows in percentage terms as salaries rise, but the absolute monthly cost stays meaningfully higher for the rest of your career, because the Plan 5 threshold gap follows you up the salary curve.
If your payslip number falls within a few pounds of these figures for your salary band, the deduction is correct. If it does not, skip to the troubleshooting section near the end.
When Plan 5 borrowers actually start repaying
This is the source of most of the confusion online right now. The rule is that you start repaying from the April after you finish or leave your course. For Plan 5, the earliest that any borrower could be due to repay is April 2026, because Plan 5 only applies to courses starting on or after 1 August 2023.
What that means in practice depends on your course length:
- Two-year accelerated degree starting Aug 2023: finished summer 2025, first repayment due April 2026. You are in the first cohort and your payslip is showing deductions now if you are earning above £25,000.
- Standard three-year degree starting Aug 2023: finishing summer 2026, first repayment due April 2027. If you are seeing a Plan 5 deduction in 2026, something is wrong on the HMRC side and you should check your starter declaration.
- Four-year degree (MEng, MSci, sandwich year) starting Aug 2023: finishing summer 2027, first repayment due April 2028.
- One-year PGCE starting Aug 2023: finished by summer 2024, with the first repayment month falling in the next available Plan 5 collection window. If you are unsure of your start date, check your SLC online account for the exact first-due date.
- Left your course early: first repayment due the April after you officially stopped studying, no earlier than April 2026.
The 40-year clock starts ticking from that first-April-due date, not the date of your first actual deduction. If you spend several years earning below the threshold after graduating, the clock still moves. If you never earn above £25,000, you never make a repayment, and the loan is written off at the 40-year mark regardless.
What if I have both a Plan 2 and a Plan 5 loan?
This is rarer than it sounds, because most people on Plan 2 finished a course before August 2023, but it does happen. The most common case is a graduate who took out a Plan 2 loan for a 2022-start undergraduate degree, then took out a Plan 5 loan for a PGCE starting in 2024.
Where a borrower has both Plan 2 and Plan 5 balances, employers apply each plan separately under PAYE. You see two deductions on your payslip, each labelled by plan code, each taking 9% above its own threshold. So on a £30,000 salary you would pay roughly £37.50 a month on the Plan 5 portion plus about £4.61 a month on the Plan 2 portion. The two balances accrue interest at their own respective rates and are written off at their own 30-year and 40-year clocks.
If your payslip shows only one deduction code when you know you have both loans, log in to your SLC online account and check that both balances are flagged for repayment. The most common payroll error in the first year of Plan 5 has been employers picking up only one plan code from the starter checklist.
The interest rate is the one bit of good news
Plan 5 charges interest at 3.2%, fixed at the Retail Prices Index figure for the year to March, with no markup added for higher earners. That is meaningfully lower than what Plan 2 borrowers face. Plan 2 charges RPI plus 3% while you are studying, then slides between 3.2% and 6.2% after you finish based on income.
The practical effect is that a Plan 5 graduate earning £45,000 pays the same 3.2% interest as a Plan 5 graduate earning £25,001. There is no penalty for earning more. That makes the long-term cost a more predictable function of the balance and the term, and it makes voluntary repayments a slightly more useful lever (more on that below) than they are on Plan 2.
What to check if your payslip number looks wrong
Three things commonly go wrong in the first year of any new repayment plan:
- Plan code on the starter checklist. When you started your job, the HR form will have asked which student loan plan you are on. If you ticked Plan 2 by mistake, you are paying at the higher Plan 2 threshold, which means smaller deductions but a wrong balance reduction. Ask HR to update your record so payroll and your tax code can be reconciled at year end.
- Mid-year salary change. If you got a pay rise or moved jobs, PAYE applies the new salary from here but does not retroactively adjust. Your monthly deduction tracks each month's earnings, not your annualised salary. A bonus month will pull a bigger slice than the formula above implies.
- Self-assessment top-up. If you have rental income, dividends, or side-hustle earnings on top of your PAYE salary, those count toward Plan 5 too. You declare them via Self Assessment by the 31 January after the end of the tax year, and the additional 9% is added to your annual tax bill.
You can sanity-check any month's deduction yourself: take your gross pay for that month, subtract £2,083.33 (one-twelfth of £25,000), multiply the result by 0.09. If your payslip shows a number within a few pence of that figure, it is correct. If it is meaningfully different, raise it with HR before chasing it further.
Should I make voluntary repayments?
Probably not, but the answer is less obvious on Plan 5 than on Plan 2. On Plan 2, the standard advice is to ignore the loan and let it write off after 30 years, because most borrowers will never repay in full and any extra payments are pure waste. On Plan 5, the lower threshold and longer 40-year term mean more borrowers will repay in full, which changes the maths.
If you expect to be a consistent high earner across your whole career, voluntary repayments can reduce total interest paid. If your career is going to look more like the average UK graduate earnings trajectory, the loan will probably still be written off and voluntary repayments are still waste. The Institute for Fiscal Studies modelling on the Plan 5 reform has shown that a meaningfully larger share of borrowers will repay in full under Plan 5 than under Plan 2, because the lower threshold and longer term combine to keep more borrowers in repayment for longer.
The general rule: do not make voluntary repayments in your twenties. Build an emergency fund, pay down any credit card or overdraft debt first, contribute to a workplace pension to get the employer match. Revisit the loan question in your thirties when you know whether your earnings trajectory makes overpayment worthwhile.
What changes if I go self-employed or work abroad?
Self-employed Plan 5 borrowers pay through Self Assessment, not PAYE. The 9% is applied to your taxable profit above £25,000 and added to your annual tax bill. Quarterly Making Tax Digital filings include the calculation automatically from April 2026 for those above the MTD threshold.
Working abroad does not let you off. You stay liable, and you must report your overseas income to the SLC each year in pounds sterling. The thresholds are converted to local equivalents using SLC's country bands. Failing to report overseas earnings is the most common reason that Plan 5 balances grow uncontrollably in the borrower's twenties.
The short version
Plan 5 takes a smaller bite than higher-rate income tax, but it takes it from a wider income band and for longer. The threshold is £25,000, the rate is 9%, the term is 40 years, the interest is 3.2%. Most three-year-degree starters from 2023 see their first deduction in April 2027, not April 2026. If your payslip already shows a deduction this year, either you finished an accelerated or shorter course, or HMRC has your plan code logged correctly because you have moved into work earlier than the standard timeline.
If the number on your payslip is within a few pounds of the worked examples above, it is correct. If it is meaningfully off, the starter checklist is the first thing to check. If you have any income outside PAYE, expect a Self Assessment top-up the following January.
