Student loans

Summary

General information about student loans, and how to set up and stop deductions 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

From 6 April 2026, there are four types of student loan repayment plans. The SL1 notification you receive from HMRC specifies the plan for your employee.

▼2025/2026 thresholds

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

Plan Type	Weekly (£)	Monthly (£)	Annual (£)	Rate (%)
1	501.25	2,172.08	26,065.00	9.00
2	547.50	2,372.50	28,470.00	9.00
4	629.71	2,728.75	32,754.75	9.00

▼2026/2027 thresholds

From 6 April 2026, the repayment thresholds are increasing to:

Plan Type	Weekly (£)	Monthly (£)	Annual (£)	Rate (%)
1	517.30	2,241.66	26,900.00	9.00
2	565.09	2,448.75	29,385.00	9.00
4	649.90	2,816.25	33,795.00	9.00
5	480.76	2,083.33	25,000.00	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 at gov.uk. You can also read the E17 Collection of Student Loans help books at gov.uk.

When to start deductions

HMRC can 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 a 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 can provide a P45 or Starter Checklist and indicate they have an unpaid student loan. If you're unsure of the type, contact the HMRC Employer Helpline on 0300 200 3200.

How this works in Sage Payroll

You can control everything to do with student loans manually, or use HMRC notices. This allows you to automatically retrieve notifications from HMRC and apply them within Sage Payroll.

How to set up the deduction

Before you can assign a student loan to an employee, you must set up the deduction.

Read Set up a student loan deduction.

Assign the student loan to the employee

Add the student loan deduction to the employee during your pay run. Sage Payroll will then calculate the correct value automatically.

Read Assign a student loan deduction.

Stopping the loan deduction

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

Read Stop a student loan deduction.