Students who started an undergraduate course, Postgraduate Certificate of Education (PGCE), or who took out an advanced learner loan on or after 1 August 2023 will be impacted by changes to the student loan payment structure.
Those students who meet the above criteria will now fall into the new Plan 5 payment plan bracket, and begin repaying their loans from April 2026 at the earliest.
If you are an employer with students and graduates amongst your workforce, it is that important you understand the new plan and how it will work.
How will the new Plan 5 payment structure work?
The Plan 5 payment structure will have three specific thresholds and, if an employee’s income matches those, they will be required to start paying off their student loan.
The thresholds for Plan 5 are £25,000 per annum, £2,083 per month and £480 a week. If any are met, loan payments will be automatically deducted from their pay.
As an example, an employee in the Plan 5 bracket earning £28,000 per annum can expect to see a deduction of £22 per month.
Employers will begin to receive Student Loan start notices from HMRC in March 2026 of any Plan 5’s that are to be set up for 2026/27 tax year, and should be using up to date starter checklists that include Plan 5 from April 2026.
From 2026/27, Plan 5 will be the new default plan type to use, where employees don’t know their plan type, until the employer receives the start notice.
How will employees be charged?
Under Plan 5, there will be a nine per cent charge on an employee’s income, which will be collected via payroll.
Employers are required to calculate that student loan repayments that are due, if any, in each pay period, based on the employee’s earnings. The amount due is deducted from the employee’s pay and paid to HM Revenue & Customs (HMRC), who then make the payment to SLC.
If the employee drops below the threshold in a pay period – for example, because of unpaid leave – they will not make a repayment for that period.
The charge will be accounted for and collected via Self-Assessment for self-employed individuals.
How can GH Payscheme help
Our payroll advisers can talk you through the student loan plans and payment structure, and help you to understand the impact of the new Plan 5.
We can help you to manage your payroll obligations, including ensuring that the correct deductions are made in respect of student loan repayments.
To discuss your payroll requirements in more detail with one of our experts, please get in touch with our team.
