Students in higher education often qualify for loans which in many cases have to be repaid
A student loan becomes repayable the following April after leaving higher education
HMRC will issue a start notice (SL1) or (SL2) to the employer if any of their employees become subject to student loan repayments
Taking on new Employees
Most new employees will have a P45. On a P45 there is a student loan indicator box which if checked means the employee is subject to continual student loan deductions. If this box is check the employer must make the necessary deduction from the employee’s first pay day.
New employees without a P45 should indicate that they have had a student loan when completing a P46 or equivalent form supplied by the employer. Once the employee has been filed online as a new starter HMRC will match the employee with their records and issue a start notice (SL1) or (SL2), upon receipt of the start notice, the employer must then make the necessary deduction from the employee’s first pay day.
There are some additional factors to consider before a student loan is deducted
Employees subject to student loans will not have to make a repayment until their gross earnings exceed a certain amount in a pay period.
Student loan deductions are calculated on an non- cumulative basis, which basically means, when the employee’s gross pay in their pay period exceeds the threshold a loan deduction is due.
Student loan deductions are deducted at a rate of 9% and are paid to HMRC with other PAYE liabilities for the month or quarter.
Every 6th April new thresholds are set
Employees will not make a repayment until their gross earnings exceed:
- Employees paid annually £18,935
- Employees paid monthly £1,577.91
- Employees paid weekly £364.13
Rate of deduction 9%
- Employees paid annually £25,725
- Employees paid monthly £2,143.75
- Employees paid weekly £494.71
Rate of deduction 9%
Postgraduate Loan Deductions
- Employees paid annually £21,000
- Employees paid monthly £1,750
- Employees paid weekly £403.84
Rate of deduction 6%