Smiling Student
  • 01 Sep 2016
  • Nov

It is now a bit more complicated to deal with student loan repayments through the payroll. You need to identify whether a new employee has a Plan 1 or Plan 2 loan to repay, as the repayments start at different annual thresholds: £17,495 and £21,000, respectively.

If your employee presents a Form P45, that will indicate whether they have an outstanding student loan, but it won’t specify whether the loan is Plan 1 or Plan 2.

The ex-student should know which type of loan they have. Ask them to confirm by completing a starter checklist (download a template from gov.uk). If they don’t know which type of loan they have, you must assume it’s Plan 1 and make deductions at 9% of pay over the lower pay threshold.

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