The specification beneath describes 2 distinct courses of parameters:
- Annual Constants whose values are equipped by HMRC
- Weekly or Monthly Constants derived from them for the payroll run
There are presently 3 kinds of student loan in operation as follows:
- Student Loan Plan 1 (SLP1) launched from 6 April 2000
- Student Loan Plan 2 (SLP2) launched from 6 April 2016
- Postgraduate Loan (PGL) launched from 6 April 2019
The loan deductions all function in the identical method, being calculated as a proportion of worker earnings which might be topic to Class 1 National Insurance contributions (E) above a selected threshold.
Once the edge earnings have been reached, employers will solely should function both Student Loan Plan Type 1 or Plan Type 2 by means of payroll, regardless that an worker might have each loan sorts.
A Postgraduate Loan could be operated by itself, or similtaneously a Student Loan (Plan 1 or Plan 2).
Student loan directions
There are three ways in which an employer could be instructed to start to function a loan deduction. This is doesn’t apply to workers topic to the off-payroll working guidelines, whose student loan repayments aren’t collected by means of the payroll of their shoppers.
Direct instruction by HMRC
HMRC will challenge an SL1 begin discover to inform an employer to start out working a Student Loan (Plan 1 or Plan 2). The SL1 will comprise the Plan Type that should be operated.
HMRC will challenge a PGL1 begin discover to inform an employer to start out working a Postgraduate Loan.
HMRC will mechanically challenge SL1 and PGL1 begin notices when a brand new employment is notified, even when deductions have already began.
Instruction from a P45 with the Continue Student Loan field accomplished
The employer ought to ask the brand new worker what kinds of loan are being repaid, and arrange a Student Loan (Plan 1 or Plan 2) or a Postgraduate Loan as acceptable. The Starter Checklist can assist this.
If the brand new worker doesn’t know the kind of loan the employer should function a Student Loan Plan 1 (This solely applies the place the worker has student loans). The worker ought to contact the Student Loan Company to verify their right loan sorts.
Instruction from a Starter Checklist accomplished by a brand new worker
The employer ought to arrange the loan deductions as indicated by the questions on the Starter Checklist.
Using the unsuitable plan sort
When a brand new worker doesn’t know the kind of loan, the employer should function a Student Loan Plan 1 for Student Loan Plan Type 1 or Plan Type 2 solely.
If the unsuitable plan sort is being operated for a student loan (Plan 1 or Plan 2), HMRC will challenge an SL1 notifying the right plan sort.
If the unsuitable loan sort is being operated, HMRC will challenge the suitable Start Notice (SL1 or PGL1) to inform the right loan sort.
HMRC will instruct an employer to cease making loan deductions by issuing an SL2 cease discover to cease a Student Loan (Plan 1 or Plan 2), and a PGL2 to cease a Postgraduate Loan.
Calculate loan deductions
|Type of Loan||Annual Threshold (AT)||Recovery Rate (R)||Tax Regime|
|Student Loan Plan 1||SL1T||SL1R||All UK|
|Student Loan Plan 2||SL2T||SL2R||All UK|
|Postgraduate Loan||PGLT||PGLR||All UK|
Periodic thresholds (PT) are calculated by dividing the Annual Threshold (AT) by the variety of durations within the yr (NP), rounding the outcome down if essential to the penny beneath.
PT = AT / NP
The sensible most discipline sizes advisable for the Annual Constants are:
Loan deductions (LD) are calculated for every loan sort the place worker earnings which might be topic to Class 1 National Insurance contributions (E) exceed the periodic threshold (PT) for every loan. The loan deduction for every loan sort is calculated because the Recovery Rate (R) proportion of the earnings that exceed the edge, rounding the outcome right down to the pound beneath if needed.
Where E > PT, LD = (E – PT) * R.
From April 2019, the place a precedence attachment of earnings order with protected earnings can be in operation, the loan deductions are restricted in order that the remaining pay can’t be lowered beneath the protected earnings quantity. Where each a Student Loan (Plan 1 or Plan 2) and a Postgraduate Loan are in operation, loan deductions should be allotted first to the Postgraduate Loan because it has a better price of curiosity.
Annual threshold (AT)
|2017 to 2018||£17,775||£21,000||n/a|
|2018 to 2019||£18,330||£25,000||n/a|
|2019 to 2020||£18,935||£25,725||£21,000|
Recovery price (R)
|2017 to 2018||9%||9%||n/a|
|2018 to 2019||9%||9%||n/a|
|2019 to 2020||9%||9%||6%|
New model to include Post Graduate Loans up to date 26 October 2018.