Student loan repayments
You should make student loan deductions if any of the following apply:
- your new employee’s P45 shows that deductions should continue
- your new employee tells you they’re repaying a student loan or a postgraduate loan, for example on a starter checklist
- HM Revenue and Customs (HMRC) sends you form SL1 or form PGL1 and your employee earns over the income threshold for their loan
What you need to do
You should follow these steps even if your employee has a P45 from their last job.
Ask your new employee if they have a student loan or a postgraduate loan - they may have both. If they finished their studies after 6 April in the current tax year, they will not start to repay their loan until the next tax year.
Record their answer in your payroll software. You do not need to calculate their loan recovery repayments - your payroll software will do this for you.
If your employee has a student loan, ask them to sign in to their repayment account and check which plan to use for deductions. They can contact the Student Loans Company if they’re still not sure.
If they cannot tell you, use Plan 1 in your payroll software until you get a student loan start notice (SL1).
Where the employee is on more than one plan, start deductions for the plan with the lowest recovery threshold until you get an SL1. Check the student loan recovery thresholds.
Report these deductions to HMRC when you pay your employee.
In some cases there are special rules for making student loan deductions. Examples include:
- you’re sent a court order to collect a debt directly from your employee’s earnings
- you change how often you pay your employee, such as from weekly to monthly
- the employee has more than one job with you and you need to aggregate earnings
HMRC will tell you if you need to stop making loan deductions from your employees’ pay. They’ll send you:
- form SL2 for student loans
- form PGL2 for postgraduate loans
Do not stop making deductions if an employee asks you to.