Collection of student loans from 6 April 2021
Updated 20 November 2024
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This publication is available at https://www.gov.uk/government/publications/payroll-technical-specifications-student-loans/collection-of-student-loans-from-6-april-2021
The specification below describes 2 distinct classes of parameters:
- Annual Constants whose values are supplied by HMRC
- Weekly or Monthly Constants derived from them for the payroll run
There are currently 4 types of student loan in operation as follows:
- Student Loan Plan 1 (SLP1) introduced from 6 April 2000
- Student Loan Plan 2 (SLP2) introduced from 6 April 2016
- Student Loan Plan 4 (SLP4) introduced from 6 April 2021
- Postgraduate Loan (PGL) introduced from 6 April 2019
The loan deductions all operate in the same manner, being calculated as a percentage of employee earnings that are subject to Class 1 National Insurance contributions (E) above a specific threshold.
Once the threshold earnings have been reached, employers will only have to operate either Student Loan Plan Type 1, Plan Type 2 or Plan Type 4 through payroll, even though an employee may have all loan types.
A Postgraduate Loan can be operated on its own, or at the same time as a Student Loan (Plan 1, Plan 2 or Plan 4).
1. Student loan instructions
There are 3 ways that an employer can be instructed to begin to operate a loan deduction. This is not applicable for deemed employees subject to the off-payroll working rules, whose student loan repayments are not collected through the payroll of their clients.
1.1 Direct instruction by HMRC
HMRC will issue an SL1 start notice to tell an employer to start operating a Student Loan (Plan 1, Plan 2 or Plan 4). The SL1 will contain the Plan Type that must be operated.
HMRC will issue a PGL1 start notice to tell an employer to start operating a Postgraduate Loan.
HMRC will automatically issue SL1 and PGL1 start notices when a new employment is notified, even if deductions have already started.
1.2 Instruction from a P45 with the ‘continue student loan’ box completed
The employer should ask the new employee what types of loan are being repaid and set up a Student Loan (Plan 1, Plan 2 or Plan 4) or a Postgraduate Loan as appropriate. The Starter Checklist can support this.
If the new employee does not know the type of loan the employer must operate a Student Loan Plan 1 (this only applies where the employee has student loans). The employee should contact the Student Loan Company to confirm their correct loan types.
1.3 Instruction from a Starter Checklist completed by a new employee
The employer should set up the loan deductions as indicated by the questions on the Starter Checklist.
2. Using the wrong plan type
When a new employee does not know the type of loan, the employer must operate a Student Loan Plan 1 for Student Loan Plan Type 1, Plan Type 2 or Plan 4 only.
If the wrong plan type is being operated for a student loan (Plan 1, Plan 2 or Plan 4), HMRC will issue an SL1 notifying the correct plan type.
If the wrong loan type is being operated, HMRC will issue the appropriate Start Notice (SL1 or PGL1) to notify the correct loan type.
HMRC will instruct an employer to stop making loan deductions by issuing an SL2 stop notice to stop a Student Loan (Plan 1, Plan 2 or Plan 4), and a PGL2 to stop a Postgraduate Loan.
3. Calculate loan deductions
| Type of loan | Annual threshold (AT) | Recovery rate (R) | Tax regime |
|---|---|---|---|
| Student Loan Plan 1 | SL1T | SL1R | All UK |
| Student Loan Plan 2 | SL2T | SL2R | All UK |
| Student Loan Plan 4 | SL4T | SL4R | All UK |
| Postgraduate Loan | PGLT | PGLR | All UK |
Periodic thresholds (PT) are calculated by dividing the Annual Threshold (AT) by the number of periods in the year (NP), rounding the result down if necessary, to the penny: PT = AT/NP.
The practical maximum field sizes recommended for the Annual Constants are:
- AT – 99999
- R – 99.99%
Loan deductions (LD) are calculated for each loan type where employee earnings that are subject to Class 1 National Insurance contributions (E) exceed the periodic threshold (PT) for each loan. The loan deduction for each loan type is calculated as the Recovery Rate (R) percentage of the earnings that exceed the threshold, rounding the result down to the pound if necessary:
Where E > PT, LD = (E – PT) * R.
From April 2019, where a priority attachment of earnings order with protected earnings is also in operation, the loan deductions are restricted so that the remaining pay cannot be reduced below the protected earnings amount. Where both a Student Loan (Plan 1, Plan 2 or Plan 4) and a Postgraduate Loan are in operation, loan deductions must be allocated first to the Postgraduate Loan as it has a higher rate of interest.
4. Parameter values
4.1 Annual threshold (AT)
| Tax year | SL1T | SL2T | SL4T | PGL |
|---|---|---|---|---|
| 2017 to 2018 | £17,775 | £21,000 | n/a | n/a |
| 2018 to 2019 | £18,330 | £25,000 | n/a | n/a |
| 2019 to 2020 | £18,935 | £25,725 | n/a | £21,000 |
| 2020 to 2021 | £19,390 | £26,575 | n/a | £21,000 |
| 2021 to 2022 | £19,895 | £27,295 | £25,000 | £21,000 |
4.2 Recovery rate (R)
| Tax Year | SL1R | SL2R | SL4R | PGLR |
|---|---|---|---|---|
| 2017 to 2018 | 9% | 9% | n/a | n/a |
| 2018 to 2019 | 9% | 9% | n/a | n/a |
| 2019 to 2020 | 9% | 9% | n/a | 6% |
| 2020 to 2021 | 9% | 9% | n/a | 6% |
| 2021 to 2022 | 9% | 9% | 9% | 6% |
New version to incorporate Plan 4 September 2020.