Student loan deduction
Deductions are calculated at 9% above an income threshold
Income contingent Student Loans are recoverable through payroll for loans taken out after August 1998. Plan 2 loans were introduced from September 2012, the original type of student loan is referred to as Plan 1.
Only the following documents are valid authorisations to commence or cease student loan deductions:
- Form SL1 – Start notice issued by HMRC
- Form SL2 – Stop notice issued by HMRC
- Form P45 – if box 5 has been ticked
- Starter checklist – if indicated by answers to the Student Loan questions
Current deductions rates for 2020/21 are as follows: –
For any loans before 2012, Plan 1 Loans will apply and for loans after 2012 Plan 2 Loans will apply.
Earnings above the thresholds for both Plan 1 and Plan 2 for 2021/22 will be calculated as normal at 9%. The rate of the postgraduate loan type introduced in the 2019/20 tax year will continue to be calculated at 6%.
Summary of the Student Plan thresholds:
- Plan 1 loans will increase from the current threshold of £19,390 to £19,895 in 2021/22.
- Plan 2 loans will increase from the current threshold of £26,575 to £27,295 in 2021/22.
- Postgraduate loans will not change and remain at the current threshold of £21,000.