If you employ undergraduates, or postgraduates, with outstanding student loans, it is important that you obtain the right information from them when they commence employment with you, in respect of these.
If your employee provides you with either a P45 or new starter checklist, you can take the information from these documents; otherwise, it is wise to ask your employee outright about any student loans they may have.
If your employee cannot confirm which Plan type they are on, Plan 1 should be selected as default until you receive a student loan start notice (SL1) from HMRC.
Knowing what Student loan Plan your employee/s is on will enable you to ensure that the correct deductions, if any, are made from their pay.
There are currently four different Plans that your employee may be on, and each brings with it a threshold which determines at what point an individual will begin to make repayments.
2022-23 Student loan repayment thresholds
The 2022-23 thresholds for existing Plan types are as follows:
| Loan Type | Repayment threshold (yearly) |
| Plan 1 | £20,195 |
| Plan 2 | £27,295 |
| Postgraduate loan | £21,000 |
| Plan 4 | £25,375 |
Reforms to student loans
On 24 February 2022, the Government confirmed reforms to student loans that will alter things slightly for new borrowers starting courses from the 2023/24 academic year.
The key change that employers should be aware of, amongst others that were outlined in a press release issued by the Department for Education, is as follows:
- New borrowers, starting courses from September 2023, will have their repayment threshold set at £25,000 until 2026/27, and the repayment term extended by 10 years. This means write off would only be possible after a period of 40 years.
What the Government have not yet confirmed, is whether reform will demand the creation of an additional Plan type – i.e. Plan 5, to accommodate the distinct threshold pertaining to this future cohort of borrowers. We will be monitoring further developments with interest.
How can GH Payscheme help?
GH Payscheme is a professional payroll bureau service, developed to help businesses in Bedfordshire, Cambridgeshire, Hertfordshire and from further afield, to operate more efficiently and cost-effectively.
We tailor our payroll services to the needs of your business, and we use the latest technology, in line with ever-changing payroll legislation, so that you can confidently fulfil your obligations as an employer.
Our professionals can help you to calculate student loan deductions and we can provide confidential, secure payslips that can be posted directly to your employees, or electronic payslips with passwords, that accurately outline the deductions that have been made.
To discuss your requirements in more detail with on our payroll experts, contact us today.
*Contains public sector information licensed under the Open Government Licence v3.0.
