Payroll - Student Loans
HM Revenue and Customs are responsible for collecting repayments of income-contingent student loans in cases where the borrower is within the United Kingdom tax system. In most cases the actual task of making the collections rests with the students employer.
An employer is responsible for:
- Making deductions of loan repayments from an employees earnings as directed by the Revenue and on the basis of deduction tables published by the Revenue.
- Keeping records of the deductions made
- Paying the deductions to the Revenue with usual PAYE and NIC payments
- Providing the Revenue with details of the amounts of student loan deducted.
- Providing the student with details of the amounts of student loan repayments deducted.
- Identifying, on a P45 form, when the employee leaves the employment, that the employee is liable to make student loan repayments.
The payroll provides a system to comply with the responsibilities of the employer.
Student Loans - Two Plans
New repayment conditions apply in relation to loans taken out by new students starting courses on or after 1st September 2012. Borrowers of post-2012 loans are not required to repay any part of the post-2012 loan before 6th April 2016
The repayment threshold for post-2012 student loan is £25,000 in 2018-19. The threshold for non post-2012 loans is set at £18,330. In both cases the rate of repayment is 9%.
The post-2012 loan is known as plan type 2 and non post-2012 as plan type 1.
Setting up a Student Loan
You will know that you have to initiate a student loan if one of two things happens You receive a start notice SL1 from the Revenue or a new employee has a P45 form and there is a 'Y' in the ?Continue student Loans deduction' box. You only stop deducting if you receive a stop notice SL2 from the Inland Revenue. or exceptionally a date from the Revenue as an emergency request either by writing or by phone, then confirmed in writing.
Student loans are entered in the Payroll/Tax details for an employee, accessed via the Payroll menu.
Payroll - Manage Employees - Action Box - Payroll/Tax Details - HMRC Supplemental Info
Activate a student loan by checking the Student Loan Case box and select either plan type 1 or 2 as appropriate (see comments above)
Enter the start date notified on form SL1 from the Revenue, or the date of the next relevant pay day if you have received a P45 from a new employee and there is a 'Y' in the 'Continue Student Loans Deduction?' box.
Enter the stop date notified on form SL2 from the Revenue, or exceptionally a date from the Revenue as an emergency request either by writing or by phone, then confirmed in writing.
Finally click SUBMIT to store the information permanently.
Calculation of the amount of the deduction
The system maintains the student loan deduction tables and therefore automatically deducts and records the correct amount, from the next payroll run after the start date. For example the P11 working deductions sheet shows deductions made in the last column.