Payroll operations

Student loan deductions for employers

How to calculate and process student loan and postgraduate loan deductions from employee pay.

UK-wide
Guide summary

You must deduct student loan repayments from employees' pay when instructed by HMRC or notified through a starter checklist. Deduct 9% for student loans and 6% for postgraduate loans from earnings above the threshold. Stop deductions only when HMRC tells you to.

  • Start deductions when you get SL1 (student loan) or PGL1 (postgraduate loan) notice from HMRC
  • Plan 1 threshold: £26,065/year (9% above this)
  • Plan 2 threshold: £28,470/year (9% above this)
  • Plan 4 threshold: £32,745/year (9% above this)
  • Plan 5 threshold: £25,000/year (9% above this)
  • Postgraduate loan threshold: £21,000/year (6% above this)
  • Maximum combined deduction: 15% (9% + 6%) if both loans apply
  • Report deductions via RTI each pay period
  • Stop deductions only with SL2 or PGL2 notice from HMRC
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UK-wide

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As an employer, you must deduct student loan and postgraduate loan repayments from employees' pay when instructed by HMRC or when notified through a starter checklist. This guide covers the thresholds, rates, and procedures for making these deductions correctly.

When to start deductions

You must begin deducting student loan repayments when you receive one of the following:

  • SL1 notice from HMRC: Start notice specifying the loan plan type
  • PGL1 notice from HMRC: Start notice for postgraduate loan deductions
  • Starter checklist: New employee indicates they have a student or postgraduate loan
  • Generic notification: HMRC coding notice indicating student loan deduction

Important: Start deductions from the next available pay period after receiving the notice. Do not backdate deductions.

Multiple loan types

An employee may have both a student loan (Plan 1, 2, 4, or 5) and a postgraduate loan at the same time. In this case:

  • Deduct both: Calculate each deduction separately against its own threshold
  • Maximum combined rate: 9% for the student loan plus 6% for the postgraduate loan (15% total of earnings above respective thresholds)
  • Protected earnings: Total deductions must not reduce pay below the National Minimum Wage

When to stop deductions

Stop deducting student loan repayments only when:

  • SL2 notice from HMRC: Official stop notice for student loan
  • PGL2 notice from HMRC: Official stop notice for postgraduate loan
  • Employee leaves: Make final deduction and include on leaving FPS

Warning: Do not stop deductions because an employee tells you their loan is repaid. Always wait for official HMRC notification. Stopping early makes you liable for the missed deductions.

Reporting student loan deductions

Student loan deductions are reported to HMRC through your normal RTI submissions:

  • FPS: Include student loan and postgraduate loan deductions each pay period
  • Year-to-date totals: Running total of deductions reported on each FPS
  • P60: Annual total shown on employee's P60 certificate
  • Leavers: Final deduction amount included on leaving FPS