31st March 2016
There’s a new additional layer of complexity in the student loans market – Plan 1 and Plan 2. Soon you will need a university course just to understand what employees have borrowed, and have this correctly administered through your payroll process.
HMRC has issued new guidance for this tax year including a new starter checklist to gather information you’ll need to operate PAYE for a new employee. You can use the checklist to help fill in your first Full Payment Submission for the employee.
With effect from the 2016 to 2017 tax year there are 2 plan types for student loans repayment:
- plan 1 with a 2016 to 2017 threshold of £17,495 (£1,457 a month or £336 per week)
- plan 2 with a 2016 to 2017 threshold of £21,000 (£1750 a month or £403 per week)
But of course when you get a new starter they are expected to know what Plan they are on. If they don’t know you have to automatically enter them as Plan 1 until HMRC advise you otherwise. That sounds like a recipe for amendments and change later down the line. HMRC advise that an employee contact the Student Loans Company if they are unsure but I believe that should not be necessary.
The plan conditions seem simple enough to understand.
Student Loans – Plan 1
Employees have Plan 1 if they took out a student loan:
- in Scotland or Northern Ireland, or received EU funding, at any time in Scotland or Northern Ireland, or
- before 1 September 2012, and:
- – lived in England or Wales; or
- – received EU funding in England or Wales.
Student Loans – Plan 2
Employees have Plan 2 if they took out a student loan
- on or after 1 September 2012, and:
- – lived in England or Wales
- – received EU funding in England or Wales
- – lived in England and took a 24+ Advanced Learning Loan for a further education course.
Special Rules for Student loans
Student Loan Company advice Plan 1 /Plan 2
