Currently there are two types of Income Contingent Student Loans however, only one is repaid via deduction through payroll. Income Contingent Loans pre-September 2012 are known as Plan 1 loans and are currently operated through payroll. Loans taken out post-September 2012 are known as Plan 2 loans and are currently repaid outside of the payroll directly to the Student Loans Company.
From 6 April 2016 Plan 2 loans will also be calculated and repaid via deduction from payroll. Employees repaying under the existing threshold will not be affected by the change.
Plan 1 Loans - £17,495 per annum
Plan 2 Loans - £21,000 per annum
Key employer facts:
• Employers will never be asked to operate more than one plan type at a time for an employee
• The main employer notice will continue to be the SL1 start notice, every SL1 issued will indicate which plan type should be operated
• From the 6th April 2016, the starter declaration checklist will prompt employers to ask new employees about their student loan plan type
• The P45 will not be amended, it will continue to indicate if employees were repaying a student loan in their previous employment but it will not specify if it was a Plan 1 or Plan 2 loan
• If new employees cannot say which Plan type they have, the default for employers is Plan 1
• If this is incorrect, HMRC will be sending a SL1 anyway once the new employee information is sent on the first FPS
• If applicable, the Plan type can be amended within the payroll software
Further information can be found in HMRC’s August 2015 Employer Bulletin