Student loan deductions

By Tolley in association with Vince Ashall
Student loan deductions

The following Employment Tax guidance note by Tolley in association with Vince Ashall provides comprehensive and up to date tax information covering:

  • Student loan deductions
  • SLD notifications
  • Deductions
  • Impact of salary sacrifice
  • Impact of non-cash benefits
  • Incorrect student loan deductions made
  • Interaction with Attachment of Earnings Order (AEO)
  • Interaction with RTI

HMRC is responsible for the collection of student loan deductions (SLDs) from April 2000 under the Education (Student Loans) (Repayment) Regulations 2009, SI 2009/470.

HMRC collects the amounts deducted by employers from their employees’ pay on behalf of the Student Loans Company (SLC). Employers pay the amounts deducted over to HMRC together with their normal tax and NI payments. It is HMRC who notifies an employer when to start or stop an SLD. Consequently, an employer has no or minimal contact with the SLC.

An employer can thus only deal with enquiries from borrowers that concern the actual SLD calculation / deduction. The employer, and indeed HMRC, is not privy to the amount of the student loan nor to any balance of the loan outstanding. In addition to student loans, there are also postgraduate loans (PGL). These operate in the same way as SLDs for the purposes of PAYE.

SLD notifications
Starting SLDs

A student loan borrower becomes liable to start repaying their student loan from 6 April following completion of their course, or leaving their course. An employer engaging someone who has recently left higher education in August / September would be notified by HMRC to commence SLDs from the following 6 April.

This notification to start the SLDs is via form SL1 (Student Loan Start Notice).

Deductions start from the first available pay date after the start date given on the SL1.

Repayment of student loans is expected to continue over a number of years and borrowers will probably change employers several times during this period. To ensure the continuity of SLDs, an employer may start the SLDs based on notifications other than the SL1.

When a new employee is engaged, a form P45 will be provided to the employee by the previous employer or, if the P45 is

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