Student loan repayments – guidance for employers



The new student loan repayment scheme requires employers to find out what type of loan the employee has in order to ensure that the correct deductions are made. These new changes came into effect for the 2016/17 tax year.

HM Revenue & Customs (HMRC) has introduced two types of student loan.

  • Plan 1 with a threshold of £17,495 (£1,457 a month or £336 per week)
  • Plan 2 with a threshold of £21,000 (£1750 a month or £403 per week)

HMRC will send a generic notification prompt for you to check and make the correct deductions for future pay periods, if you haven’t reported any student loan deductions for a specific employee when a deduction was expected in your payroll submission.

The prompt will be delivered to your email inbox along with your Generic Notification Service messages. You should check your inbox regularly to ensure you can act on any prompts.

If you receive a prompt instructing you to start student loan deductions, you will need to refer to the SL1 Start Notice, if you have it, or ask your employee which plan type they are repaying. You should record this in your payroll software to ensure deductions start at the next available payday using the correct plan type.

If you don’t act on a student loan prompt and your next payroll submission doesn’t show a student loan deduction HMRC will send you a second prompt. If you don’t act on the second prompt, HMRC may contact you by telephone to ensure you start to make deductions. This may be time consuming for you, and could impact on your employee’s student loan repayments.

You can minimise the impact on your time when dealing with employees who have student loans by:

  • Regularly checking your inbox for online notices
  • Implementing SL1 and SL2 notices at the first available payday
  • Checking that you are making deductions against the correct plan type

If you need help or more information about student loan deductions, contact Jackie or Andrew on 01625 524127

Castletons Accountants

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