Student loans

Summary

How to set up and remove student loans in Sage Payroll

Description

Student loans provide financial support to UK students pursuing higher education

Any loans that an employee took out after August 1998 are repayable through your payroll.

Resolution

Starting the student loan

Loan repayment plans

There are three types of student loan repayment plans. The SL1 notification you receive from HMRC specifies the plan for your employee.

▼2024/2025 thresholds

From 6 April 2024, the repayment thresholds are:

Plan Type	Weekly (£)	Monthly (£)	Annual (£)	Rate (%)
One	480.57	2,082.50	24,990.00	9.00
Two	524.90	2,274.58	27,295.00	9.00
Four	603.75	2,616.25	31,395.00	9.00

▼2025/2026 thresholds

From 6 April 2025, the repayment thresholds are increasing to:

Plan Type	Weekly (£)	Monthly (£)	Annual (£)	Rate (%)
One	501.25	2,172.08	26,065.00	9.00
Two	547.50	2,372.50	28,470.00	9.00
Four	629.71	2,728.75	32,754.75	9.00

Student loans only deduct if the employee’s earnings for NI are over the threshold set by HMRC.

For more information, refer to the HMRC SL3 Student Loan Deductions tables. Also read the E17 Collection of Student Loans helpbooks.

When to start deductions

HMRC may notify you in various ways to start student loan deductions:

You receive a Start Notice, form SL1, from HMRC. The start date will be at least six weeks from the date of issue.
A new employee gives you form P45 and there’s a Y in the Student Loan deductions box.
A new employee provides you with a Starter Checklist form. They select Yes to say they have an unpaid student loan.

NOTE: A starter may provide a P45 or Starter Checklist and indicate they have an unpaid student loan. If you're unsure which type, contact the HMRC Employer Helpline on 0300 200 3200.

How to set up the deduction

You can create this within the Pay Run or in Settings. Once set up, add it to the employee in the PAY section of processing a pay run.

▼Set up a student loan deduction

Select the Settings tab from the menu bar.
Select Payments & Deductions.
Select the Deductions tab, then Create New Deduction.
For Deduction Category, select Student Loans.
For Deduction Type, select Student Loan (Plan 1), Student Loan (Plan 2), or Student Loan (Plan 4).
Edit the name and description, if required.
Select Save.

You’ve now set up the deduction and can apply it at the Edit Pay stage of a pay run. For more information on this, read Edit Pay during a pay run.

Stopping the loan deduction

Once the deduction starts, continue to make student loan deductions from the employee. Only stop deducting if notified by HMRC.

When to stop taking deductions

There are also different ways you're notified to stop making student loan deductions:

HMRC sends you a form SL2 Stop Notification
If you need to stop making deductions quickly, HMRC may request you to stop by phone or letter

How to stop the deduction

To stop a student loan deducting, remove the deduction from the employee in the pay run.

This won't delete the student loan from the payroll system. It just removes it from the selected employee.

▼Stop and remove a student loan deduction

Select Pay Puns from the menu bar.
Select Process Pay Run for the selected pay cycle.
Confirm the pay date and select Next.
Deal with any absences and select Next.
Select the relevant employee and select the X button next to the Student loan deduction.
Complete the rest of the pay run.

The deduction hasn't stopped or was taken in error

You’ll need to edit the previous pay run and remove the deduction. The FPS will include these changes to inform HMRC.

You can repay the student loan taken in error through payroll.

For more information, read Correct a completed pay run.

Does it affect a previous tax year?

If the changes stretch over a previous Payroll Year End, send a Supplementary FPS.

Do this once you process up to the last period of the affected tax year.

For more information, read Supplementary FPS.