There are four types of student loan repayment plans; Plans 1, 2, 4 and postgraduate loans (PGL). A borrower is normally only required to repay one plan type at a time if they have a Plan 1, 2 or 4.  

Recent changes

However, this procedure changed with the introduction of postgraduate loans from 6 April 2021. If a borrower is repaying either Plans 1, 2 or 4 and they have a postgraduate loan, they may have to repay the postgraduate loan at the same time.  

The official guidance for employers has now been updated to reflect that.

Where the student loan(s) are deducted via the payroll, there are three ways that an employer may receive instructions:

  1. Item 5 on the employee’s P45 has a “Y”.
  2. A new starter has indicated that they are repaying a student loan(s) on the Starter Checklist. Or 
  3. The employer has received instructions from HMRC on
    forms SL1 and PGL1.

If an employer is operating off-payroll working rules for a worker, then they are not required to operate a student loan deduction. The worker must account for any student loan deductions through their own company’s payroll or via their tax return.

How it is calculated

Here is a reminder of the latest thresholds:

Student Loan Plan TypesAnnualMonthlyWeeklyDeduction calculated on NI’able earnings above the threshold
Plan 1£19,895£1,657.91£382.599%
Plan 2£27,295£2,274.58£524.909%
Plan 4£25,000£2,083.33£480.769%
Postgraduate£21,000£1,750.00£403.846%

HMRC’s official guidance on gov.uk has been updated to include instructions where an employee has more than one type of student loan in force.  Further details of the employer guidance on Gov.uk can be found here.

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