Employers fulfil many collection roles for HMRC, one of which is the collection of student loan repayments.
There are now three types of student loans for which employers may be responsible for deducting loan repayments from an employee’s pay. These are:
- Plan 1 Student Loans;
- Plan 2 Student Loans; and
- Post-graduate Loans (PGLs).
Employees must make repayments in respect of a student loan when their income exceeds the threshold for their particular loan type. Each loan has its own repayment threshold. The thresholds are as follows:
|Plan 1 Student Loan||£18,935||£1,577.91||£364.13|
|Plan 2 Student Loan||£25,725||£2,143.75||£494.71|
Repayments are made at the rate of 9% on income in excess of the threshold for Plan 1 and Plan 2 Student loans, and at a rate of 6% on income in excess of the threshold for PGLs.
Where an employee has both a student loan and a PGL, deductions will be made at the combined rate of 15% where income exceeds the higher loan threshold.
An employer will need to start making deductions in respect of a student or PGL if any of the following apply:
- a new employee is taken on and has a ‘Y’ in the student loan box on their P45;
- a new employee tells the employer they are repaying a student loan;
- a new employee completes a starter checklist confirming that they have a student loan;
- the employer receives a SL1 start notice from HMRC;
- the employer receives a PGL1 start notice from HMRC; or
- the employer receives a Generic Notification Service Student Loan reminder.
The employer should check they are aware of the type of loan that the employee has, confirming the loan type with the employee where necessary.