Flow Shorts: Plan 5 student loans are now live in your payroll
- Stephen Kelly
- Aug 20
- 2 min read
Plan 5 is the newest student loan repayment plan, and 2026/27 is the first year employers have had to operate it through PAYE. The first Plan 5 borrowers began repaying in April 2026, so if you run a payroll there is a new deduction category to get right - and one default that can catch you out.
Who is on Plan 5:
anyone who applied to Student Finance England and started their course on or after 1 August 2023
that is wider than degrees: it covers undergraduate courses, PGCEs, Advanced Learner Loans and the Lifelong Learning Entitlement
repayments are 9% of earnings above £25,000 a year, and the loan is written off 40 years after the April repayment first fell due
At £25,000, Plan 5 has the lowest threshold of the undergraduate plans - Plan 1 sits at £26,900 and Plan 2 at £29,385 for 2026/27 - so a Plan 5 borrower starts repaying on a lower salary. With a 40-year write-off rather than Plan 2's 30, most will also be repaying for longer.
The point for employers is the default. From 2026/27, Plan 5 is the plan type your software will apply where an employee's plan is unknown. So a new starter who ticks the student loan box without naming a plan will have Plan 5 deducted until HMRC's SL1 start notice says otherwise. HMRC began issuing those notices in March 2026.
Deduct according to the SL1 notice and the starter declaration rather than what the employee believes they are on. Borrowers are often wrong about their own plan, and unpicking the wrong one mid-year is more work than getting it right at the first payslip.
If you would like us to check your payroll set-up before the next starter arrives, get in touch with the Flow team.
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