Student Loans are part of the Government's financial support package for students in higher education in the UK. They are available to help students meet their expenses while they are studying.
HMRC is responsible for collecting repayments of these in cases where the borrower is within the UK tax system and no longer in higher education.
There are currently 4 types of student loan in operation as follows:
The loan deductions all operate in the same manner, being calculated as a percentage of employee earnings that are subject to Class 1 National Insurance contributions above a specific threshold (see thresholds below).
There are 3 ways that an employer can be instructed to begin to operate a loan deduction:
1) Direct instruction from HMRC:
2) Instruction from a P45 with the ‘continue student loan’ box completed:
3) Instruction from a Starter Checklist completed by a new employee:
The employer is responsible for:
Once an employee's income goes over the relevant threshold, the employer will deduct 9% of their income that's over the threshold towards repaying their loan.
To access this utility, simply go to ‘Employees’ and select the employee’s name on the left:
1) Click on the Tax/ NICs/RTI heading
2) Select the drop down arrow for "Student Loan" and choose the applicable Student Loan Plan
3) Enter a start date and stop date, if known
4) Click Save Changes
The payroll software will now automatically calculate and apply the appropriate student loan deduction as per the current Student Loan Deduction Tables.
A quick-edit facility for student loan deductions can also be found in ‘Payroll’:
1) Select the employee’s name from the listing
2) Click Edit Settings at the top right of the employee's payslip
3) Within Tax/NIC Details, select the applicable Student Loan Plan
4) Enter a start date and stop date, if known
5) Click Save
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