Student Loans and Payroll
It’s this time of year when students across the UK will be preparing for University, which these days also brings with it huge costs which can often be a weighty financial burden on your adults. Student loans can often make the difference between being able to attend university or not.
When people think about student loans and paying them back, payroll does not automatically spring to mind. However, National Payroll Week is the perfect time to highlight how student loans and payroll are very much intertwined.
There are three types of student loan, all of which can be repaid through the PAYE, once in future employment.
For Student Loan Plan 1 and 2, payments are calculated above the threshold at 9% and for the Post Graduate Loan at above the threshold at 6%. From the 6th April 2019, employers may have needed to collect payment for a Post-graduate loan.
The thresholds for 2019/20 are:
|Type of Loan||Annual||Monthly||Weekly|
|Plan1 Student Loan||£18,935||£1,577.91||£364.13|
|Plan 2 Student Loan||£25,725||£2,143.75||£494.71|
The important thing to recognise is that if employees have both a student loan and a postgraduate loan, the deductions may be collected simultaneously.
The employer will be notified either initially by a P45 or new starter form and also from the HMRC. It is important that an employer checks which type of loan is applicable, if any, to their employees.
Equally it is also important for the employee to understand and check that the correct student loan has been applied with the correct amount of deduction. Deductions are calculated based on the employees’ gross pay before the deduction of tax, National Insurance and pension deductions.
Deductions will only stop if an employer receives a SL” orPGL2 Stop Notice from the HMRC.
To students past and present and for those already considering their academic moves for next year, we hope this is helpful and insightful and we are always here to answer questions from yourselves and employers. Please contact us at email@example.com or call 01904 464100.