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Calculating student loan deductions

Students in higher education in the UK can get loans to help with their expenses while they're studying. The Student Loans Company makes the loans but HM Revenue & Customs (HMRC) collects the repayments.

Students start repaying their loan once they've left higher education and their income is more than a certain amount - the threshold. If their income is high enough, their repayments start in the April after they leave higher education.

The income threshold for starting to make repayments is £15,000 a year (£1,250 a month or £288 a week). Once an employee's income goes over the threshold, you deduct 9 per cent of their income that's over the threshold towards repaying their loan.

HMRC collects the repayments along with your employer PAYE (Pay As You Earn) deductions.

On this page:

Your responsibilities as an employer

As an employer, you're responsible for:

  • deducting student loan repayments from an employee's earnings
  • recording the deductions on your employee’s payroll record (enter them in column 1k if you still use a paper form P11 rather than electronic records)
  • paying the deductions over to HMRC
  • providing HMRC with details of the deductions at the end of the tax year
  • giving details of the deductions on your employee's payslip
  • showing that the employee's liable to make student loan repayments on their form P45 when they leave

You're not responsible for:

  • deciding that employees have to make student loan repayments
  • handling employees' queries about their loan, tell them to contact the Student Loans Company on Tel 0870 240 6298

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When to start making Student Loan Deductions

You should only start making student loan deductions if:

  • HMRC sends you form SL1 Start Notice and the employee's total pay exceeds the student loan threshold
  • your new employee gives you form P45 with 'Y' in the Student Loan deductions to continue box (box 5)
  • your new employee gives you form P46 Employee without a form P45 with a tick in box D (Student Loans)

Receiving form SL1

If you receive a form SL1 it will give you a start date for making student loan deductions. You must start making deductions on the first available payday on or after that date.

If you receive a form SL1 for someone you're already making student loan deductions for, perhaps because they ticked box D on their P46, carry on making the deductions and keep form SL1 on file.

If you receive form SL1 for someone who's left

You might receive a form SL1 after an employee's stopped working for you. If you've already filled in their P45 all you need do is:

  • send HMRC the P45 if you haven't already
  • keep form SL1 on file

If you haven't yet filled in form P45 then do so, putting 'Y' in the box headed Student Loan Deductions. Then follow the usual procedures and file away form SL1.

If you receive form SL1 for someone you've never employed

Tell HMRC if you get a form SL1 for someone you've never employed and they'll look into it. Keep the form on file and they'll let you know if you need to do anything more.

If you receive form SL1 for someone who claims they never had a student loan

If you get form SL1 for someone who says they've never had a student loan, start making deductions and carry on until HMRC tells you not to.

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How to calculate the student loan deduction

How you go about this will depend on whether you operate payroll using software or manually. Using payroll software is quick and easy and reduces error.

If you use commercial payroll software

Commercial payroll software will usually calculate any student loan deductions automatically, along with PAYE and National Insurance contributions (NICs) deductions. Simply follow the software instructions.

If you use HMRC’s P11 Calculator

If you use HMRC's P11 Calculator - on the Employer CD-ROM - to work out PAYE tax and NICs, it will also calculate your student loan deductions.

In the employee database you simply follow the instructions for indicating that student loan deductions need to be made.

You can do this either:

  • when entering the employee's details for the first time
  • by amending their details after you receive form SL1

Once you've entered the details, it'll make deductions automatically for each pay period - there's no need to use the separate Collection of Student Loans Calculator on the Employer CD-ROM.

If you complete a paper form P11

If you complete the paper form P11, HMRC recommends that you use the Student Loan Calculator on the Employer CD-ROM. This will work out the deduction automatically and prevent error. You then record the deduction in column 1k on form P11.

If your employee's annual pay is no more than the upper earnings limit of £60,060 (£1,155 a week or £5,005 a month) you can use the student loan tables to work out the deduction. However this method is more time consuming and more prone to error than using the calculator.

You'll need to:

  • decide which table to use - weekly or monthly
  • look up the amount of earnings in the week or month to find the corresponding student loan deduction

If the exact figure isn't shown, look for the nearest figure below and use the amount of student loan deduction shown for that range of earnings.

You can't use the Student Loan Deduction Tables to work out the deduction if your employee's annual pay is more than the upper earnings limit. Instead, you can:

  • use the P11 Calculator
  • use the Student Loan Calculator
  • work out the deduction yourself

There's an example of how to make the calculation yourself in HMRC’s Employer Helpbook E17, 'Collection of Student Loans' and there’s a link to that publication at the end of this section. Working out the deduction yourself is more difficult and time consuming.

You'll find both the calculator and the tables on the Employer CD-ROM. Make sure you're using the latest copies of these.

You can order the tables and CD-ROM online or through HMRC’s Employer Orderline on Tel 08457 646 646 or textphone 0800 959 598, open from 8.00 am to 8.00 pm, Monday to Friday and from 10.00 am to 1.00 pm on Saturdays except Christmas Day, Boxing Days and New Year's Day. You can also view the tables below.

View the Student Loan deduction tables (PDF 33K)

Order the Employer CD-ROM or Student Loan Deduction tables online or by phone

View Employer Helpbook E17, 'Collection of Student Loans' (PDF 248K)

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When to stop making student loan deductions

There are only three reasons to stop making student loan deductions:

  • if you receive form SL2 Stop Notice
  • if HMRC writes to ask you to stop making deductions - if they ask over the phone, they'll always write to confirm
  • if you're an educational institution or local education authority in England or Wales and a teacher you employ gives you a letter from the Student Loans Company telling you to stop making deductions because they've joined the Repayment of Teachers Loan Scheme

If you receive form SL2 Stop Notice it will show a stop date. You must stop making deductions on the first available payday on or after that date.

Don't stop making deductions just because your employee asks you to. If they think you shouldn't be making deductions they should contact the Student Loans Company on Tel 0870 240 6298. Don't contact the Student Loans Company yourself - they won't give information to a third party.

An employee tells you they ticked form P46 box D in error

If an employee tells you that they ticked box D on form P46 in error (including because they have a ‘mortgage-style’ loan advanced before 1 September 1998), check whether you’ve received either of the following in relation to the employee:

  • a form SL1 Start Notice from HMRC
  • a form P45 (Part 3) from their previous employer, marked with a ‘Y’ in box 5

If you’ve received either of these forms, then continue making deductions as normal. (Your employee can contact the Student Loans Company if they still feel that deductions aren’t due.)

But if you haven’t received either of the forms, then continue making deductions for the time being but phone the HMRC Employer Helpline on Tel 08457 143 143. They’ll advise you what steps to take. If it’s confirmed that student loan deductions from the employee aren’t necessary, HMRC will write authorising you to stop them and requesting you to refund any deductions already made.

Employees who have left

If the employee has left and you've completed a P45, just file away the SL2 Stop Notice. If you haven't completed a P45 then do so, leaving the box 5 'Student Loan deductions' blank. There's a flowchart in Employer Helpbook E17, 'Collection of Student Loans' which will help you follow the right procedure.

View Employer Helpbook E17, 'Collection of Student Loans' (PDF 248K)

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Student loan deductions - special cases

There are some situations you need to be aware of that can affect the way you'll calculate the deduction. These are:

  • court orders - you'll need to know the order of deductions based on their priority
  • payments after an employee dies - make no deductions from payments made after their death
  • payments after an employee leaves - use the same earnings period as for NICs
  • the employee has more than one job - ignore earnings from another employer
  • holiday pay - use the same basis as for NICs
  • change of pay interval - adjust for the new earnings period

You'll find more information in HMRC’s Employer Helpbook E17, 'Collection of Student Loans'.

View Employer Helpbook E17, 'Collection of Student Loans' (PDF 248K)

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Student loan deductions - employee working abroad

If you keep paying an employee while they work abroad you should continue making deductions. You'll find more information about working abroad in the Frequently Asked Questions (FAQs) section on HMRC’s website.

Get answers to FAQs about student loan repayments when working abroad

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Student loan deduction errors

If you deduct the wrong amount, the action you'll need to take depends on whether you can correct the situation during the current tax year.

For mistakes in the current year, repay an over deduction or collect an under deduction if you can do so in the current year. There is a flowchart in Employer Helpbook E17, ‘Collection of Student Loans’ which shows you how to do this. You’ll find a link to this publication at the end of this section.

Otherwise, contact HMRC’s Employer Helpline on Tel 08457 143 143, open from 8.00 am to 8.00 pm, Monday to Friday and from 8.00 am to 5.00 pm, Saturdays and Sundays, except Christmas Day, Boxing Day and New Year's Day.

For mistakes made in an earlier year:

  • if you've sent in form P35 Employer Annual Return, tell the employee to let their Tax Office know about an over deduction, and to let the Student Loans Company know about an under deduction
  • if you haven't sent in your P35, take no further action to recover an under deduction but repay an over deduction and amend your records

View Employer Helpbook E17, ‘Collection of Student Loans’ (PDF 248K)

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Student loan deductions - make it easy

You'll find that using approved commercial payroll software or HMRC’s P11 Calculator on the Employer CD-ROM will save you time and always give more accurate results than using paper methods. Using software also simplifies the process of filing your Employer Annual Return (P35 and P14s) online. This is a significant advantage now that almost all employers are required to file their annual return online.

More about filing your Employer Annual Return online

More about using commercial payroll software or the P11 Calculator

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More useful links

View a quick guide to the collection of student loans (PDF 58K)

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