The good news is you don’t have to do anything complicated as the Student Loan company and HMRC will sort out the hard stuff out for you.
They will issue a ‘Student Start’ notification to you once you have set the new employee up on your payroll.
The rate of student loan repayments is normally 9% above the relevant threshold.
The threshold at which your employee will start to repay will depend on which repayment plan they are on. The plans are based on the type of course they attended, where they live and when they first applied for the loan. Broadly the plans can be summarised as follows:
- Plan 1 if they:
- Are an English or Welsh student who started an undergraduate course anywhere in the UK before 1 September 2012
- Are a Scottish or Northern Irish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998
They will only repay when your income is over £364 a week or £1,577 a month (before tax and other deductions)
- Plan 2 if they:
- Are an English or Welsh student who started an undergraduate course anywhere in the UK on or after 1 September 2012
They will only repay when your income is over £494 a week or £2,143 a month (before tax and other deductions).
- Postgraduate Loan repayment plan if they are an English or Welsh student who:
- took out a Postgraduate Master’s Loan on or after 1 August 2016
- took out a Postgraduate Doctoral Loan on or after 1 August 2018
They will only repay when your income is over £404 a week or £1,750 a month (before tax and other deductions).
Your employee should tell you which plan they are on. If they aren’t sure, they will have to phone the student loan company.
On your payroll software, you must select the relevant plan and it should calculate the right amount of repayment each pay period for you.
The student loan repayments you deduct from your employee will be paid over to HMRC alongside the tax and national insurance liability you deduct from your other employees. HMRC will then automatically pay it over to the student loan company to offset your employee’s loan balance.
At TaxAssist Accountants, we can help you with student loan repayments. Alternatively, we can look after your payroll completely, leaving you to concentrate on the business Please get in touch today, call on 0800 0523 555 or use our simple online contact form to book a free initial consultation so we can we show you how we can help.