An SL2 is the student loan stop notice HMRC sends an employer. It tells you to stop taking student loan deductions for an employee from the first available payday after the stop date on the notice. The postgraduate version is the PGL2. You can't stop deductions just because the employee asks, and once an SL2 arrives you mustn't refund anything yourself.
This guide follows HMRC's student loan and postgraduate loan repayment guidance for employers, updated in April 2026, as of October 2026.
The only two reasons to stop
HMRC's guidance gives employers two triggers for stopping. You receive an SL2 or PGL2 stop notice, or, in exceptional circumstances, HMRC asks you to stop, in writing or by phone followed by writing. Nothing else counts, including the employee saying they've paid it off.
That's deliberate. A borrower who thinks they've overpaid deals with it themselves by asking for a refund. Payroll's job is only to follow the notices.
When the stop takes effect
Stop from the first available payday after the deduction stop date shown on the notice. HMRC defines that as the first payday on which it's practical to apply the notice. So if the SL2 reaches you after this month's payroll has closed, the next run is the one that changes.
Check which loan it covers. The SL2 and the matching reminder tell you which plan or loan type to stop, so an employee repaying both a student loan and a postgraduate loan may only have one stopped.
The reminder that comes with it
Since September 2019, HMRC has sent a third type of PAYE Online reminder telling you to stop deductions from the next pay date. It confirms that an SL2 or PGL2 has been sent or is on its way for the employees listed. If you have neither the reminder's detail nor the notice, you can ask the employee which loan to stop.
What to do in your payroll
| Situation | What HMRC says to do |
|---|---|
| Still employed, and you use Basic PAYE Tools | Edit the employee in the database, remove the student loan borrower indicator and keep the SL2 |
| Left, and you haven't sent leaver details yet | Leave the student loan box blank, submit leaver details in Real Time Information and give P45 parts 1A, 2 and 3 |
| Left, and leaver details already sent | Just keep the SL2 |
The P45 when an SL2 is on file
When someone leaves after an SL2, deductions shouldn't follow them. Leave box 5 of the P45 blank, send leaver information through Real Time Information and hand over parts 1A, 2 and 3. That's also the rule when HMRC wrote to tell you to stop, or when an SL1's start date falls after the employee left.
Why you can't refund after an SL2
Normally, if you took too much in the current tax year you'd pay it back through payroll and correct the year-to-date figures. HMRC's guidance switches that off once an SL2 or PGL2 arrives. You must not make any refund, and the employee contacts the Student Loans Company instead.
The same goes for any request to stop early. HMRC's guidance says you can't stop because the employee asks, and that they should ask for a refund if they think they've overpaid.
Fixing mistakes before an SL2 arrives
Errors are handled differently while there's no stop notice. If you over-deducted and can repay the borrower in the current tax year, do it and amend the year-to-date records. If you under-deducted, you can collect it in the current tax year, but in each period you can only take an extra amount up to that period's normal deduction.
HMRC's example: £25 under-deducted in week 8, and £15 due in week 9. You can take £30 in week 9, the normal £15 plus £15 of the shortfall, and recover the last £10 in later periods. If you can't put it right in the current year, contact the Employer Helpline.
Deaths and pensions
Two cases end deductions without an SL2. Pay made after an employee dies doesn't attract Class 1 National Insurance, so no student loan repayment is due on it, even for wages, accrued holiday or a final bonus earned before death. And if you only pay an occupational pension, the fourth PAYE Online reminder tells you to stop and to refund any deductions you made in the current tax year.
Anyone curious about another filing can start with the walkthrough of the student loan start notice.
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What the borrower sees
GOV.UK's borrower guide explains why an SL2 often arrives after the last payment was due. HMRC tells the employer to stop once the loan is repaid in full, and it can take around 4 weeks for salary deductions to stop, so a borrower may pay back more than they owe. The Student Loans Company then tries to contact them or refunds them automatically, shown in their bank as SLC Receipts.
The guide tells borrowers to keep their payslips and P60 because they show how much was repaid in the tax year, and they'll need them for a refund. Pointing a worried employee there, or to the Student Loans Company, is the right answer when they ask you to stop.
The verdict
Only an SL2, PGL2 or written HMRC instruction switches deductions off. Apply it from the first practical payday after the stop date, leave P45 box 5 blank if they go, and send any refund question to the Student Loans Company. Keep the notice: it's your proof you stopped for the right reason.
Tax paperwork rarely stands alone, and the walkthrough of the pension pot tax refund claim covers another form.
Related: loans: guidelines and how to pitch.
Frequently asked questions
What is an SL2 from HMRC?
It's the student loan stop notice telling an employer to stop student loan deductions for an employee from a stop date.
When do I stop deductions after an SL2?
From the first available payday after the deduction stop date on the notice, meaning the first payday when it's practical to apply it.
Can I stop student loan deductions if my employee asks?
No. HMRC's guidance says you can't stop because the employee asks; they should ask for a refund if they think they've overpaid.
Can I refund deductions after an SL2?
No. Once you've received an SL2 or PGL2 you mustn't make any refund; the employee contacts the Student Loans Company.
What goes in P45 box 5 after an SL2?
Leave it blank, so deductions don't continue with the next employer.
Does an SL2 stop postgraduate loan deductions?
Not by itself. The postgraduate version is the PGL2, and each notice tells you which plan or loan type to stop.
