Why Is My Payslip Showing Student Loan Deductions

Many people first notice student loan deductions when they receive a payslip that shows a student loan repayment taken from their salary. This can happen even if the employee has not thought about their loan in years or believes they should not be repaying yet. In most cases the deduction is correct and is triggered automatically by HMRC when your income passes the repayment threshold. Sometimes the deduction appears because your employer has not yet received the right plan details or HMRC has not updated your record.

This article explains all the reasons your payslip might show student loan deductions, how the system works, what counts as the correct repayment plan and what to do if you believe the deduction should not be there.

How Student Loan Repayments Normally Work Through Payroll

Student loan repayments for English, Welsh, Scottish and Northern Irish borrowers are collected through the tax system. When you earn above a specific threshold your employer must automatically deduct a percentage of your salary and send it to HMRC.

The basic rules are:

• repayments start only once your income passes the threshold

• employers must deduct based on the plan type HMRC instructs them to use

• the system updates automatically once HMRC confirms your plan

• deductions show clearly on your payslip

You cannot opt out of payroll deductions if HMRC instructs your employer to start collecting them.

Reason 1: You Are Earning Above the Repayment Threshold

This is the most common reason for student loan deductions.

Every plan has a specific income level where repayments begin. If your earnings rise above the threshold in any payroll period your employer must make a deduction, even if previous months were below the limit.

Current annual repayment thresholds

• Plan 1: £22,015

• Plan 2: £27,295

• Plan 4 (Scotland): £25,375

• Plan 5: £25,000

• Postgraduate loan: £21,000

If your pay exceeds the threshold in a single month or week, your employer must deduct the appropriate percentage even if your annual income will not exceed the threshold long term.

Reason 2: HMRC Has Told Your Employer to Start Deductions

Employers do not decide when to start student loan repayments. HMRC sends a notice to the employer instructing which plan to use and when to begin deductions. This instruction overrides anything you tell your employer verbally.

HMRC may issue the instruction because:

• you recently started a job

• your income increased

• your student loan record updated

• your previous employer advised HMRC that you were earning above the threshold

Once HMRC issues a start notice your employer must follow it.

Reason 3: You Completed a Starter Checklist Saying You Have a Student Loan

If you joined a new employer and ticked the box on the starter checklist saying you have a student loan, your employer is legally required to begin deductions until they receive your correct plan type from HMRC.

This is why deductions sometimes start before HMRC sends final instructions.

If you ticked the wrong box, you can correct this by contacting HMRC.

Reason 4: HMRC Does Not Yet Know Your Correct Plan Type

In some cases HMRC does not immediately know whether you are on Plan 1, Plan 2, Plan 4 or Plan 5. When that happens, they may instruct the employer to use the default plan until your record updates.

The default plan may be higher or lower than your real repayment rate which can cause deductions earlier than expected.

Once HMRC receives updated data from the Student Loans Company they will issue your employer with the correct plan.

Reason 5: Your Payslip Shows Both Student Loan and Postgraduate Loan Deductions

If you took out an undergraduate loan and a postgraduate loan you must repay both if your income is above both thresholds. This can make your payslip look confusing because each loan type is shown separately.

This is normal and correct.

Reason 6: You Have More Than One Job

If you work multiple jobs HMRC may apply your student loan deduction to one or both employments depending on how your income is split.

For example:

• Job A pays £18,000

• Job B pays £12,000

Together you earn £30,000 which is above the threshold. HMRC may instruct one employer to make deductions or may instruct both, depending on previous payroll submissions.

If you believe your income should not trigger repayments contact HMRC to update your employment details.

Reason 7: Your Employer Used an Emergency Tax Code

Sometimes emergency tax codes trigger temporary assumptions about your student loan status. If HMRC did not have your full employment history a temporary student loan instruction may appear.

This corrects itself after HMRC receives updated payroll data.

Reason 8: Your Income Spiked for One Month

Repayments are based on income for that pay period, not annual earnings.

So if you receive:

• a bonus

• overtime

• commission

• backdated pay

• a second job

• a termination payment

you may suddenly exceed the threshold for that period which triggers a deduction.

Repayments return to zero once your pay drops below the threshold in future periods.

Reason 9: You Are Near the End of Your Loan and Overpaying

If your loan is almost repaid the Student Loans Company may still take deductions through payroll until HMRC receives the final balance update.

This is common and later overpayments are refunded.

Why Employers Cannot Remove or Change Student Loan Deductions Themselves

Employers must follow HMRC instructions exactly. They cannot:

• stop deductions

• change your repayment plan

• refund previous deductions

• alter thresholds

• apply updates from your personal tax account

The only way to change or stop deductions is for HMRC to update your employer with a formal stop notice.

What to Do If You Think Your Student Loan Deductions Are Wrong

Step 1: Check your plan type

You can check your plan type through your Student Loans Company online account.

Step 2: Check what you told your employer

If you accidentally told them you have a loan when you do not, HMRC may have been instructed incorrectly.

Step 3: Check your pay against the threshold

Look at your gross pay for that pay period. If it exceeded the threshold, the deduction is correct.

Step 4: Contact HMRC if the deduction is incorrect

Only HMRC can correct your record and issue a stop notice or a new plan notice.

Step 5: Ask about refunds if you overpaid

If you overpaid because of a wrong plan or outdated HMRC record you can request a refund from the Student Loans Company.

Real World Examples

Example 1: New job with a tick-box error

Sophie joined a new employer and ticked “I have a student loan” by mistake. HMRC instructed the employer to start deductions. She contacted HMRC who updated her record and issued a stop notice. Her employer stopped deductions the following month.

Example 2: Income spike

David normally earns £2,000 per month but received a £3,000 bonus. His payslip showed a student loan deduction for the first time. The following month, when his income returned to normal, no deduction was taken.

Example 3: Wrong plan type

Priya borrowed under Plan 2 but HMRC had her marked as Plan 1. Her employer deducted too much. She contacted HMRC who corrected her plan and the Student Loans Company refunded the overpayment.

Example 4: Two jobs

Emma has two part time jobs. Neither job alone is above the threshold but HMRC combined her income and applied deductions to one employer. This is correct because HMRC makes decisions based on total income across employers.

How to Stop Future Deductions When Your Loan Is Fully Repaid

Your loan does not stop automatically the moment your balance reaches zero. HMRC needs confirmation from the Student Loans Company.

If you believe you are close to finishing your loan:

• switch to direct debit repayment on the SLC website

• this stops overpayments through payroll

This is the fastest way to ensure deductions do not continue longer than necessary.

Conclusion

Student loan deductions appear on your payslip whenever your income goes above the repayment threshold or HMRC instructs your employer to start collecting repayments. In many cases the deduction is correct even if unexpected, because the rules apply to each pay period rather than your annual salary. Employers cannot change or stop deductions themselves. Only HMRC can issue a start notice, stop notice or plan change.

If you believe the deduction is wrong check your plan type, your pay level and any forms you completed when starting your job. If needed, contact HMRC or the Student Loans Company to correct your record. Once updated, your employer will automatically adjust or stop deductions in the next payroll period.