The tax year 2016/2017 saw the implementation of a new Student Loan plan type. This change took effect on 6th April 2016 under which there are now two "plan types" termed Plan 1 and Plan 2.
Plan Type 1
- All existing student loans at 5th April 2016 will be referred to as Plan Type 1
- The threshold for plan type 1 has been amended to £17,495
Plan Type 2
- A new threshold of £21,000 has been introduced for Plan type 2.
If you have employees repaying under the existing threshold, they will be will unaffected by the change and these existing loans will be described as a Plan type 1 loan. Employers will only ever be asked to operate either Plan Type 1 or Plan Type 2 deductions at one time.
- How will the Employer know which plan to use?
HMRC will issue an SL1 start notice which will now include the plan type the employer should make deductions against.
Form P45 will only indicate whether an employee is already repaying a student loan. It will not indicate a plan type and so you must ask the new employee for this information. The new starter declaration will prompt the employer to ask new employees about their Plan type. If the new employee does not know their plan type Plan 1 should be used by default and the employee should check their correct plan type with Student Loans Company. You will need to tell your dedicated PayStream Plus payroll contact which plan to apply when you inform us of your new employees. Please click here to see to the updated HMRC starter checklist which encompasses the changes to Student Loan.
Please remember to tell us of the correct student loan plan for your employees in your payroll submission.