11814: Processing student loan deductions.

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Article ID 11814
Article Name Processing student loan deductions.
Created Date 06 Feb 2019 00:00:00
Product IRIS GP Payroll

How do I start student loan deductions for an employee?


Starting Student Loan Deductions

To enable student loans deductions you need to set the student loan option to "Yes" within the employee details screen:

GP Payroll will automatically calculate the amount to be deducted in the next payroll calculation.

Student Loan Plan Type

As of the 2016/17 tax year, there is now an option of which student loan plan type the employee should be set to. The difference in the plan types is the threshold at which deduction will begin. The threshold for plan type 1 for 18/19 is £18,330, for 19/20 £18,935. The threshold for plan type 2 for 18/19 is £25,000, for 19/20 is £25,725. BOTH plan types calculate deduction at  9% of the NIC liable pay. When you receive the SL1 from HMRC it will specify which plan type to use.

Please Note: There is no provision on the p45 form to indicate which plan type an employee should be on. When you add a new starter to the system, the employee needs to confirm the following;

• Did they live in Scotland or Northern Ireland when they started the course? OR
• Did they live in England or Wales and started the course before 1 September 2012?

If so, set them to plan type 1.

• Did they live in England or Wales and started the course on or after 1 September 2012.

If so, set them to plan type 2.

If your employee cannot confirm these details, ask them to contact the Student Loan Company (SLC). If they’re still unable to confirm their plan type, start making deductions using plan type 1 until you receive further instructions from HMRC.


Stopping a Student Loan

When you receive the SL2 message from the HMRC, return to the screen above and set the student loan option to "No".

Please note: Student loans will not be deducted if the employee's earnings are below the Student Loan Threshold. For tax year 18/19 this is £18,330.00 (type 1) or £25,000 (type 2) . Student loans contributions are then 9% of all NIable pay over this amount. The deducted amount is always rounded down to the whole pound value.

Example calculation (Plan type 1):

The employee is paid £1600.00 NIable pay for the month.

Monthly Student Loan Threshold = 18330 ÷ 12 = £1527.50

Employee Pay subject to Student Loan = £1600.00 - £1527.50 = £72.50

9% of £72.50 = £6.53, rounded down to the whole pound, employee contribution is £6

Student loan deductions are included in the PAYE costs for the employer on the month end summary (p32) report. These values get added onto the other PAYE liabilities for the company and are paid to HMRC directly along with the tax and NI due. You do not need to send payments to any other body.

Refunding Student Loan

Please Note:  This functionality was introduced to GP Payroll with v2016.2.20. If you need to process student loan refunds please ensure you are running this version or higher.
Click here for GP Payroll updates

To action a Student Loan Refund use the button found in Payroll Calculations | Temporary Adjustments | Extra Payments screen. Click this button to open the Student Loan Refund screen where you can enter the refund amount to be processed.

Processing the Student Loan Refund will automatically reduce the Total Student Loan value until it reaches the minimum of 0.00. From this screen you can also choose if you require the addition to be:
• Included in Pension calculations
• Included in Qualifying Earnings

There may be occasions when you need to refund more than the year-to-date value, for example, if you are refunding student loan deducted in the previous tax year. If you attempt to refund an amount greater than the year-to-date value a message will be displayed asking if you want to continue.

Please note: The Employer’s Payment Record (P32) and your FPS will reflect any Student Loan Refund. However, if you refund a Student Loan in the current tax year and also include an amount taken in a previous tax year, we would advise that you send an EYU to correct the previous year’s Student Loan to-date value.

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