4. 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
  • when you ask, your new employee tells you they’re repaying a student loan
  • HM Revenue and Customs (HMRC) sends you form SL1 and your employee earns more than £17,335 a year (£1,444 a month or £333 a week)

What you need to do

If your new employee needs you to make student loan repayments, record this in your payroll software. It will automatically calculate and deduct repayments from their pay at 9% of their income over £17,335 a year. (There will be a new income threshold from 6 April 2016.)

Report these deductions to HMRC when you pay your employee.

Special rules

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

Stopping deductions

HMRC will send you form SL2 if you need to stop deducting student loan repayments from your employee’s pay. Don’t stop making deductions if an employee asks you to.

If your employee has any questions about student loan repayments, they can contact the Student Loans Company.