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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.
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As an employer, you're responsible for:
You're not responsible for:
Employees who are student loan borrowers will sometimes approach you with questions about the student loan deductions you make from their pay. Whilst it's not your responsibility to answer those questions, being able to advise them who to contact about their query should help to reduce the number of questions you get asked. HMRC has produced a leaflet which aims to answer some simple questions that both employers and their employees may have and also to advise on who to contact with any other questions.
Download leaflet CSL2, Collection of Student Loans - a guide for employers and employees (PDF 80K)
You should only start making student loan deductions if:
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.
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:
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.
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 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.
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.
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 - which is part of the Basic PAYE Tools package - 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:
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 within the Basic PAYE Tools package.
A set of Basic PAYE Tools are now available to download straight to your computer. In addition to the P11 Calculator, the tools include:
Download Basic PAYE Tools from the Business Link website (Opens new window)
If you complete the paper form P11, HMRC recommends that you use the Student Loan Calculator within the Basic PAYE Tools package. 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:
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:
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 the calculator in the Basic PAYE Tools package. Make sure you're using the latest copy of this.
You can also view the tables below.
Download the Student Loan deduction tables (PDF 176K)
View Employer Helpbook E17, 'Collection of Student Loans' (PDF 293K)
Contact the Employer Orderline
There are only three reasons to stop making student loan deductions:
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.
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:
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. 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.
Find contact details for HMRC's Employer Helpline
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 293K)
There are some situations you need to be aware of that can affect the way you'll calculate the deduction. These are:
You'll find more information in HMRC's Employer Helpbook E17, 'Collection of Student Loans'.
View Employer Helpbook E17, 'Collection of Student Loans' (PDF 293K)
Repayment of Teachers' Loans Scheme
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
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.
For mistakes made in an earlier year:
View Employer Helpbook E17, 'Collection of Student Loans' (PDF 293K)
Find contact details for HMRC's Employer Helpline
You'll find that using approved commercial payroll software or HMRC's P11 Calculator contained within the Basic PAYE Tools package 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
View a quick guide to the collection of student loans (PDF 58K)
