Student loan repayment guidance for employers
HMRC has updated its guidance for employers on what deductions to make for employees who have more than one student loan plan.
If your employee does not know which plan or loan type they’re on, the guidance suggests they go to repaying your student loan.
If they cannot tell you, use Plan 1 in your payroll software until you get a student loan start notice (SL1). Where the employee is on more than one plan, start deductions for the plan with the lowest recovery threshold until you get an SL1.
Plan and loan types and thresholds
With effect from April 2021, the thresholds for making student loan deductions are: -
Plan 1 - £19,895 annually (£1,657.91 a month or £382.59 per week);
Plan 2 - £27,295 annually (£2,274.58 a month or £524.90 per week);
Plan 4 - £25,000 annually (£2,083.33 a month or £480.76 per week).
Employees repay 9% of the amount they earn over the threshold for Plan 1, 2 and 4.
Postgraduate loans (PGL) - £21,000 (£1,750 a month or £403.84 a week)
Employees repay 6% of the amount they earn over the threshold for PGL.
If you receive if form SL1 or PGL1 “Start Notice” for someone: -
You have never employed phone the Employer Helpline, HMRC will investigate and contact you again if necessary, file away to the SL1 or PGL1 “Start Notice”.
Who claims never to have had a student loan, start making deductions in line with the “Start Notice” and continue doing so unless HMRC tells you otherwise, then file away to the SL1 or PGL1 “Start Notice”.
For whom you’re already making deductions you should:
Check the plan type on the SL1 “Start Notice” you have just received;
Update your payroll software and start making deductions using the new plan type at the next available payday if this is different to the one you are currently using;
Check the details on the PGL1 and update your payroll software if needed.
If your employee thinks they have overpaid their deductions they should contact the Student Loan Company (SLC) – repayment enquiries.
If you receive an employee’s P45 after they have started to work for you, and they did not tell you, or indicate on their starter information they were a student loan borrower, or there is a gap since their last employment, you should ask them to confirm their plan or loan type.
You should start making deductions from the next payday. If your employee does not know their plan or loan type they should go to repaying your student loan. Do not make any deduction in arrears.