How should student and postgraduate loan deductions be handled through payroll?

Student loan deductions depend on the employee's repayment plan, while postgraduate loans are handled separately. An employee may have both types at once. Use the P45, completed starter checklist and relevant HMRC notices to establish what should be operated. If the employee does not know their plan, ask them to check it and follow HMRC's current default instructions while awaiting confirmation. Plan 5 entered repayment from April 2026, so older onboarding instructions may need updating. Do not guess from the employee's age or where they currently live. Keep the evidence supporting the payroll setup so later changes can be explained and checked.

Apply the current threshold and rate for the correct plan using the relevant earnings and pay period. A bonus or overtime payment can trigger a deduction even where the employee usually earns below the threshold. Student loan calculations should not simply copy the employee's PAYE tax calculation. Use updated payroll software and review unusual payments or changes of pay frequency. If the employee has another job, their earnings there are not normally added into your payroll calculation. Keep the deduction visible on the payslip and reported correctly. This helps the employee understand why a particular month's net pay differs from their usual amount.

HMRC start notices identify deductions that must be operated, including the relevant student loan plan or postgraduate loan. Check electronic notices before each payroll and apply the instructed dates through the proper process. An employee saying the loan has been repaid is not, by itself, authority to stop deductions. Follow the HMRC stop notice or other authorised instruction. If the employee disputes a notice or repayment balance, direct them to the appropriate HMRC or Student Loans Company route while checking your own records. Keep notices and the dates they were applied. An informal adjustment can create a fresh error while trying to resolve the original concern.

Distinguish a payroll mistake from deductions correctly made during a high-pay period. An employer correction and a borrower refund claim are different processes, and the appropriate route can depend on the tax year and notices received. Do not promise that every deduction will be refunded through the next payslip. Gather pay dates, plan details, deductions and relevant correspondence first. Employees completing Self Assessment should also supply their payroll loan deductions so the return can account for them correctly. CASS can check payroll operation within the agreed service. Questions about the underlying loan balance, interest or repayment eligibility should be taken to the Student Loans Company.