Plan and loan types and thresholds
With effect from April 2022, the thresholds for making student loan deductions are:
- Plan 1 — £20,195 annually (£1,682.91 a month or £388.36 a week)
- Plan 2 — £27,295 annually (£2,274.58 a month or £524.90 a week)
- Plan 4 — £25,375 annually (£2,114.58 a month or £487.98 a week)
Employees repay 9% of the amount they earn over the threshold for Plan 1, 2 and 4.
Postgraduate loans (PGL) — £21,000 (£1,750 a month or £403.84 a week)
Employees repay 6% of the amount they earn over the threshold for PGL.
Starting student loan and PGL deductions, checking plan and loan type
You should work out the correct figure of employee earnings on which student loan and PGL deductions are due. Use the same gross pay amount that you would use to work out your employer’s secondary Class 1 National Insurance contributions.
Your employee may be liable to repay a PGL at the same time as a Plan 1, Plan 2 or Plan 4. Start making student loan and, or PGL deductions from the next available payday using the correct plan or loan type or both.
You will need to include these on your Full Payment Submission if any of the following apply:
- your new employee’s P45 shows deductions should continue — ask your employee to confirm their plan or loan type, or both
- your new employee tells you they’re repaying a student loan — ask your employee to confirm their plan or loan type, or both
- your new employee fills in a starter checklist showing they have a student loan and or PGL — the checklist should tell you which plan or loan type, or both to use
- HMRC sends you form SL1 ‘Start Notice’ — this will tell you which plan type to use
- HMRC sends you form PGL1 ‘Start Notice’ — this will tell you they have a PGL
- you receive a Generic Notification Service student loan and, or PGL reminder — ask your employee to confirm their plan or loan type, or both
If you’re operating off-payroll you are not responsible for deducting student or postgraduate loan repayments for workers engaged through their own companies. The worker will account for student loan obligations in their own tax return.
Follow the guidance Off-payroll working.
If your employee does not know which plan or loan type they’re on, ask them to go to Repaying your student loan. 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.
If you receive a form SL1 or PGL1 ‘Start Notice’ for someone:
- you have never employed, phone the Employer Helpline, HMRC will investigate and contact you again if necessary, file away the SL1 or PGL1 ‘Start Notice’
- who claims never to have had a student loan, start making deductions in line with the Start Notice and continue doing so unless HMRC tells you otherwise, then file away the SL1 or PGL1 ‘Start Notice’
- for whom you’re already making deductions you should:
- check the plan type on the SL1 ‘Start Notice’ you have just received
- update your payroll software and start making deductions using the new plan type at the next available pay
day if this is different to the one you are currently using - check the details on the PGL1 and update your payroll software if needed
If your employee thinks they have overpaid their deductions they should contact Student Loan Company (SLC) — repayment enquiries.
If you receive an employee’s P45 after they have started to work for you, and they did not tell you, or indicate on their starter information they were a student loan borrower, or there is a gap since their last employment, you should ask them to confirm their plan or loan type.
You should start making deductions from the next payday.
If your employee does not know their plan or loan type they should go to Repaying your student loan.
Do not make any deductions in arrears.
Where a new employee fills in an expat starter checklist or indicates on the starter declaration checklist which specifies student loan and PGL deductions apply, you should start making these deductions from the next payday.
You should only use an expat starter checklist where employees have been seconded to work in the UK whilst remaining employed by an overseas employer. Find more information in the guide to PAYE and National Insurance contributions.
Generic Notification Service (GNS) messages
HMRC will send 4 types of student loan or postgraduate loan GNS reminders.
One is a reminder to start deductions where:
- you submit a Full Payment Submission (FPS) for an employee who has a student loan or PGL deduction due
- the FPS shows a figure of nil
This GNS reminder is confirmation that HMRC has sent or is in the process of sending you an SL1 or PGL1 ‘Start Notice’ for the employees shown.
The second is a reminder to make deductions using the correct plan type where:
- you submit an FPS for an employee and have selected the plan type from the drop-down box on your payroll software
- the plan type declared on the FPS does not match what HMRC holds for that employee
For each employee shown on the reminder, you should start making the correct deductions from the first available pay day. You should look at the SL1 or PGL1 ‘Start Notice’ or completed starter checklist for details of the correct student loan plan and loan type to use. If you do not have either of these, ask your employee the starter checklist questions. This will allow you to start deductions using the correct plan and loan type.
If you’re paying an occupational pension rather than a salary, you should ignore any student loan GNS message.
The third GNS message, introduced from September 2019, is a reminder to stop student loan or PGL deductions for an employee from the next available pay date.
This GNS reminder is confirmation that HMRC has sent or is in the process of sending you an SL2 or PGL2 ‘Stop Notice’ for the employees shown. This GNS message and the SL2 or PGL2 ‘Stop Notice’ will tell you the correct loan or plan type to stop taking deductions from. If you do not have either of these you can ask your employee.
The fourth GNS message, introduced from April 2020, is a reminder not to deduct Student Loan or PGL deductions for an employee who is subject to the off-payroll working rules or only has an occupational pension rather than a salary.
These employees are not liable for Student Loan and PGL deductions and you must stop taking these deductions from the next available pay date.
For occupational pensions, refund any Student Loan and or PGL deductions you have made within the current tax year to your employee.
For employments subject to the off-payroll working rules from April 2020, only refund the Student Loan and or PGL deductions taken from payments subject to the off-payroll working rules only.
You will receive these reminders as GNS messages to your Online PAYE account. HMRC recommends that you register for email alerts for these reminders and may contact you to make sure the correct deductions begin.
Stopping student loan and PGL deductions
Stop making student loan or PGL deductions when:
- you receive an SL2 or PGL2 ‘Stop Notice’ from HMRC
- in exceptional circumstances, HMRC may ask you to stop making deductions — if this is the case they’ll tell you in writing or by phone and then confirm in writing
SL2 or PGL2 ‘Stop Notice’ received
Stop making deductions from the first available payday after the deduction stop date shown on the notice. The ‘first available payday’ is the first payday on which it’s practical to apply that notice.
If the borrower is still employed by you and you use Basic PAYE Tools for this employee edit the employee details in the employer database. You can do this by removing the student loan or PGL borrower indicator and keep the SL2, or PGL2 ‘Stop Notice.’
If the borrower is no longer employed by you and you have not submitted leaver details to HMRC:
- leave the box headed ‘Enter ‘Y’ if student loan deduction is to be made’ blank
- submit leaver information in Real Time Information (RTI) and provide employee with P45 parts 1A, 2 and 3
If you have submitted leaver details you should keep the SL2 or PGL2 ‘Stop Notice’.
You cannot stop making deductions because your employee asks you to. Your employee should contact the SLC if they think they have overpaid their loan.
Employee dies
Do not make any deductions from any payments made after an employee dies as these payments are not subject to Class 1 National Insurance contributions. This applies even though the payment may relate to a period prior to death, for example, unpaid wages.
Employee leaves
If you make a payment to a borrower who is no longer your employee, calculate the student loan or PGL deductions on the same amount, and for the same earnings period as for employer’s secondary Class 1 National Insurance contributions.
When an employee leaves, check if you’re making student loan or PGL deductions.
If you have received:
- a SL1 or PGL1 ‘Start Notice’ with a start date in the current or a previous tax year
- a P45 with a ‘Y’ in box 5
- starter information indicating student loan or PGL deductions apply
You should:
- fill in P45 with ‘Y’ in box 5 indicating student loan deductions should continue
- send leaver information to HMRC in RTI and give your employee P45 parts 1A, 2 and 3
- enter ‘Y’ on P45 box 5 even if your employee has not earned enough to make student loan or PGL repayments
If you receive either:
- form SL2 or PGL2 ‘Stop Notice’
- written instructions from HMRC to stop making deductions
- form SL1 or PGL1 ‘Start Notice’ with a start date which is after they leave your employment
You should:
- fill in P45 leaving box 5 blank
- send leaver information to HMRC in RTI and give your employee P45 parts 1A, 2 and 3
Employee has more than one job
If an employee has more than one job you should ignore earnings from the other employer.
If the employee has more than one job with you follow the aggregate rules if they apply. Otherwise treat both employments separately.
Change of pay interval
If the interval between the payments of an employee’s earnings changes, for example, from weekly to monthly, you need to adjust the deductions for the new earnings period.
Work out the student loan or PGL deduction from the first payment after the change based on the new earnings period. This may mean you include details of pay and deductions already included in the last pay period before the change.
If you have included a payment already made in the first of the new longer periods, you should take the payment already made, and the deduction worked out on it, into account when working out the student loan or PGL deduction for the new period as a whole.
Example
You pay an employee repaying on Plan 1 £500 weekly. The pay interval changes to monthly in the third week of the month. The monthly pay is £2,000. The £2,000 payment in week 4 is made up of the two £500 payments made in weeks 1 and 2 plus £1,000 for weeks 3 and 4.
| Week | Example |
|---|---|
| 1 | Student loan deductions on pay of £500 are £11 (weekly pay) |
| 2 | Student loan deductions on pay of £500 are £11 (weekly pay) |
| 3 | The employee is now monthly paid and receives no pay in this week |
| 4 | Student loan deductions on pay of £2,000 are £34. £22 has already been deducted so the amount now due to be deducted is £12 (£34 minus £22) |
You can find more information on what to do if the interval between the payment of an employee’s earnings changes in Chapter 1 of the guide to PAYE and National Insurance contributions.
The guidance given for National Insurance contributions purposes also applies to student loan deductions.
Errors deducting student loan or PGL repayments
Follow this process unless you have received an SL2 or PGL2 ‘Stop Notice’. If you’ve received a SL2 or PGL2 ‘Stop Notice’ you must not make any refund. Instead, your employee should contact the SLC.
Current tax year
If you have made an over deduction and you can repay it to the borrower during the current tax year you should do so, amending your Year-To-Date payroll records.
If you cannot repay it phone the Employer Helpline.
If there’s been an under-deduction and you can collect it from the borrower in the current tax year you should do so. Correct your Year-To-Date payroll records to reflect what was actually deducted.
If you cannot collect it phone the Employer Helpline.
During each period you can only collect an additional amount less than, or equal to, the amount that is due to be deducted in that period.
| Example | Amount |
|---|---|
| Under-deduction in week 8 | £25 |
| Deduction from tables in week 9 | £15 |
| Under-deduction recovered in week 9 | £15 |
| Maximum total deduction | £30* |
(*that is, £15 week 9 deduction + £15 under-deduction)
You may recover the remaining £10 under-deduction in later pay periods following the above rules.
Previous tax year
If you have submitted your final FPS for that year you do not need to take any further action.
If asked, you should tell your employee to contact the SLC.
If you have not submitted your final FPS for that year for any over-deductions you can repay the employee and amend your records so the final FPS reflects the correct amounts. For under-deductions you do not need to take any further action. Further deductions will cover repayment of the balance of the loan.
Variable interest rates
From April 2017, SLC set interest rates for Plan 2 loans based on an individual’s income. The FPS you make gives this income information, and HMRC passes it to SLC. There is no action for you to take but some employees may ask you to check and confirm the information you have sent to HMRC.
Sharing PAYE information with SLC: more frequent data sharing
From April 2019, HMRC started to send the student loan and PGL repayment information reported on your FPS to the SLC more frequently throughout the tax year. Known as ‘more frequent data sharing’, this means that there will be regular updates on your employee’s student loan and, or PGL balance. There is no action for you to take but some employees may ask you to check and confirm the information you have sent to HMRC.
Employees working abroad
Employee paid from the UK
If you’re operating PAYE as though the employee were in the UK continue to make student loan or PGL deductions no matter how long they’re working abroad.
Employee paid locally abroad
If you pay a borrower abroad they must contact the SLC to have a repayment schedule set up.
Court orders and how they affect student loan and PGL deductions
In addition to student loan and PGL deductions, you may have to consider a court order such as an Attachment of Earnings Order (AEO) or Deductions from Earnings Order (DEO).
The order and amount of student loan and PGL deductions depends on whether the:
- AEO, DEO is a priority or non-priority order
- AEO, DEO is based on specific or percentage amounts
- total deductions including student and, or PGL deductions means your employees pay is less than the protected earnings level specified in the court order
Order of deduction in England, Wales and Northern Ireland
Priority order — percentage based
Some priority orders — Council tax or Community Charge AEOs or Income Support Deduction notices — are percentage deductions.
Do not deduct any student loan or PGL repayments until all such orders are paid in full.
AEOs issued by Magistrates’ Courts under The Courts Act 2003 Regulations are percentage based. You should still treat these as ‘Priority order — specific amounts’ and calculate the student loan and PGL deduction as normal.
Priority order — specified and non-specified amounts
If there is no specified level of protected earnings:
- Apply the priority order against the borrower’s attachable earnings before making student loan or PGL deductions.
- Calculate the student loan and PGL deductions using payroll software or the SL3 student loan deduction tables.
If there is a specified level of protected earnings:
- Apply the priority order against the borrower’s attachable earnings before making student loan or PGL deductions.
- Calculate the PGL and student loan deductions with PGL deductions taking priority before Student Loan deductions.
- Check the deduction of court orders, PGL or student loan deduction does not reduce the available income below the level of protected earnings.
Where the deduction of court orders, PGL and student loan reduces the available income below the level of protected earnings, the maximum amount of student loan and PGL deductions is the difference between the following:
- the net attachable earnings after deduction of the AEO, DEO
- the level of protected earnings rounded down to the nearest pound, if negative, set to zero
Non-priority orders
Take away student loan or PGL deductions before non-priority court orders.
Order of deduction in Scotland
Scottish court order
Do not make any student and, or PGL loan deductions if you’re required to apply any of the following:
- an Earnings Arrestment
- a current Maintenance Arrestment
- a Conjoined Arrestment Order
Deduction of Earnings Order
Make student and, or PGL deductions after the DEO, which is a priority order, but the employee’s pay must not fall below the protected earnings level.
Scottish court orders and DEOs
Do not make any student and, or PGL deductions if you have a DEO and a Scottish court order to apply.
Scottish Debt Arrangement Scheme (DAS)
Collection of student and, or PGL deductions is not affected by instructions to make deductions under the DAS.
Repayment of teachers’ loan scheme
This scheme is no longer available.
Record keeping
You should keep records of all wages, and other documents relating to the calculation and deduction of student loan or PGL repayments, including forms SL1 and PGL1 ‘Start Notice’ and SL2 and PGL2 ‘Stop Notice’, for a period of at least 3 years after the end of the tax year to which they relate.
Enter the amount of student loan and PGL deductions in the appropriate box on your employee’s FPS, and P60 (whole pounds only).
