Plan 5 Student Loan Repayments 2026/27: the £25,000 Tax Most Freelance Calculators Miss
Updated September 2026 · Tax year 2026/27 · Thresholds per HMRC Employer Bulletin (Dec 2025) and GOV.UK · Figures from our tax model
If you started university in England or Wales in August 2023 or later, your student loan is on Plan 5 — and April 2026 was the first ever repayment year for the whole cohort. The headline nobody repeats often enough for freelancers: the Plan 5 threshold is £25,000, the lowest of any undergraduate plan, and the repayment rate is 9% of everything above it, collected on your trading profit, not your turnover.
The five plans side by side (2026/27)
| Plan | Who it applies to | Annual threshold | Monthly | Rate |
|---|---|---|---|---|
| Plan 1 | Started before Sept 2012 (England/Wales) or NI | £26,900 | £2,242 | 9% |
| Plan 2 | Started Sept 2012 – July 2023 | £29,385 | £2,449 | 9% |
| Plan 4 | Scottish students | £33,795 | £2,816 | 9% |
| Plan 5 | Started Aug 2023 or later | £25,000 | £2,083 | 9% |
| Postgraduate | Master's / doctoral loans | £21,000 | £1,750 | 6% |
The Plan 5 threshold is fixed at £25,000 until April 2027, then rises with RPI. Plan 2 is frozen at £29,385 from April 2027 to 2030 — so inflation erodes it while Plan 5 climbs. On top of that, a Plan 5 loan runs for a 40-year term (vs 30 for Plan 2) with no +3% interest surcharge.
The freelancer blind spot: it is profit, not turnover, and it lands in Self Assessment
Employees repay through PAYE per pay period. Freelancers repay through Self Assessment — 9% of your trading profit (after allowable expenses) above the threshold, plus any other taxable income such as rental or savings interest. Two consequences most day-rate calculators never show:
- Expenses directly cut the loan. A £3,000/year laptop, software and home-office claim at £35,000 profit reduces the repayment by 9% × £3,000 = £270 — on top of the income tax (20%) and Class 4 NI (6%) you already save on every claimed pound.
- Both jobs count jointly. If you freelance part-time and also hold a PAYE job, each employer only checks its own pay against the monthly threshold; HMRC then reconciles your total income in Self Assessment and you may owe the difference in one bill (with the January and July payments on account).
What you actually repay: profit vs plan (2026/27)
| Profit | Plan 1 | Plan 2 | Plan 4 | Plan 5 | PGL (6%) |
|---|---|---|---|---|---|
| £25,000 | £0 | £0 | £0 | £0 | £240 |
| £28,000 | £99 | £0 | £0 | £270 | £420 |
| £30,000 | £279 | £55 | £0 | £450 | £540 |
| £35,000 | £729 | £505 | £108 | £900 | £840 |
| £40,000 | £1,179 | £955 | £558 | £1,350 | £1,140 |
| £50,000 | £2,079 | £1,855 | £1,458 | £2,250 | £1,740 |
| £60,000 | £2,979 | £2,755 | £2,358 | £3,150 | £2,340 |
9% of profit above each plan's threshold; Postgraduate Loan (PGL) repayments on top if you also hold one. At £35,000 a Plan 5 borrower repays £900/year — 8.9× more than a Plan 2 borrower at the same profit (£505) and £792 more than a Scottish Plan 4 borrower (£108). The Plan 5 borrower's bill is second only to the Postgraduate Loan at almost every level.
The 35% marginal tax band freelancers do not budget for
Between £25,000 and £50,270 of profit, a Plan 5 freelancer in England is squeezed by three simultaneous charges: 20% income tax + 6% Class 4 NI + 9% student loan = a 35% marginal rate. Above £50,270 it drops back to 31% (40% income tax + 2% Class 4 + 9% loan — the 2% NI tail softens the jump).
The hidden pension lever. A £5,000 pension contribution by a freelancer with £45,000 profit does more than save income tax: it cuts income tax by £1,000, Class 4 NI by £300 and the student loan repayment by 9% × £5,000 = £450. Total cash saving from one £5,000 contribution: £1,750 — a 35% relief that most articles still quote as "only 20%".
Day-rate perspective: what Plan 5 costs your take-home
At 230 billable days (our standard UK contractor assumption), here is the annual Plan 5 bill on the profit a typical day rate yields (sole trader, mid-range expenses):
| Day rate | Profit (230 days) | Plan 5 repayment | % of profit |
|---|---|---|---|
| £250 | £57,500 | £2,925 | 5.1% |
| £350 | £80,500 | £4,995 | 6.2% |
| £450 | £103,500 | £7,065 | 6.8% |
| £550 | £126,500 | £9,135 | 7.2% |
| £650 | £149,500 | £11,205 | 7.5% |
At the UK median IT day rate of ~£500 (£115,000 profit) a Plan 5 freelancer repays about £8,100/year. That is a real line in your cash-flow — and it is absent from virtually every day-rate take-home comparison, which only shows income tax and NI.
The Scotland split nobody warns about
A Scottish graduate on Plan 4 earning £33,000 pays nothing (threshold £33,795). An English graduate on Plan 5 with the same profit repays 9% × £8,000 = £720. Same income, same country of residence, entirely different bill — purely because of when and where they studied. On top of that, Scottish income tax rates are higher than rUK from ~£36,000 for 2026/27 — so a Scottish-domiciled English graduate gets the worst of both sides.
Three things to do before the January deadline
- Check which plan HMRC thinks you are on. Your Self Assessment return asks for your plan type, and the loan field appears only above the threshold. If you tick the wrong plan (or none), the January bill is wrong and SLC only reconciles later — with interest.
- Front-load pension contributions before 5 April 2027: at 35% marginal relief (20+6+9) a £5,000 SIPP contribution saves £1,750 in total taxes including the loan piece nobody quotes.
- Claim every business expense — the loan repayments scale with profit, so a claimed £3,000 of software/hardware/home-office costs saves 35% × £3,000 = £1,050 across income tax, Class 4 NI and Plan 5.
Plan 5 numbers belong in your day-rate and take-home planning from day one. Run your own rates through our freelance day rate calculator 2026/27, and for the bigger structural choice (sole trader vs limited company vs umbrella under the new dividend tax) our £300–£1,000/day take-home matrix shows where each route wins.