Collection of Student Loans

New regulations have changed the nature of higher education funding. These involve the introduction of a new Student Loan scheme.

You will be affected only if you have an employee who is liable to repay their student loan while working for you. And it's only for loans taken out after August 1998 so you may not see it for some time.

Overview of Student Loans

  • Student Loans are made by the Government to help meet students' expenses whilst they are attending courses in higher education
  • Under a new student loan scheme, relating to courses starting after August 1998, HM Revenue & Customs is responsible for collecting repayments of these student loans. (The issue and administration of the student loans continues to be handled by the Student Loans Company)
  • Repayments start once the student loan borrower has started work and has earnings at a rate exceeding £15,000 a year. (Or, once the student loan borrower has started self employment and has profits in excess of £15,000)
  • In PAYE cases repayments are deducted from earnings by the employer each pay day, using the Student Loans Deduction Tables, (supplied by HM Revenue & Customs)
  • The employer is responsible for recording and handing over the repayments to HM Revenue & Customs along with tax and NICs

Points to note

  • Only start deducting repayments following the receipt of either
    • A Start Notice, (Form SL1), from HM Revenue & Customs

      or

    • A form P45 with a "Y" in the CONTINUE STUDENT LOAN DEDUCTIONS box

  • Continue to deduct repayments until either the employee leaves or you receive a Stop Notice, (Form SL2), from HM Revenue & Customs. If an employee leaves before a Stop Notice is received employers should enter a 'Y' in the Continue Student Loan Deductions box on the form P45.
  • No new forms have been introduced to record repayments. (Record all repayments deducted on forms P11, P14, P30BC, P32, P35, P45, P60 along with pay, tax and NICs).

Where to obtain help

  • To obtain copies of the Student Loans Deduction Tables - phone the Employer's Orderline on 0845 7 646 646
  • To obtain help on the Student Loans Deductions scheme - phone the Employer's Helpline on 0845 7 143 143
  • For details of Student Loans and all other employer information - visit HM Revenue & Customs web page - www.hmrc.gov.uk

What will HM Revenue & Customs do?

  • We will let you know if you have an employee from whom you need to deduct student loan repayments.
  • We will give you clear guidance on what to do, which will include a table to help with the calculation you need to do.
  • When repayments of a loan are first due to begin, or where there is a chance of employment without a P45, we will notify employers.
  • When repayments are to stop we will notify employers.
  • For new employees already repaying, employers will normally pick this up from a P45.

What will employers do?

  • From 6 April 2000, employers will deduct student loan repayments from relevant employees - along with PAYE tax and NICs. The deductions of loan repayments will be on pay period by pay period basis, like NICs. In other words, they are non-cumulative.
  • Employers will work out the amount of the repayment. Initially, the calculation of the repayment will be 9% of NICs liable pay above £15,000 a year (or the weekly/monthly equivalent of £15,000).
  • Employers will record the amount of the loan repayment deducted on
    • The employee's payslip
    • The form P11 Deductions Working Sheet (or equivalent)
    • The P14/P60 and P35.

Employers will pay the amount of the student loan repayments deducted to HM Revenue & Customs along with PAYE tax and NICs remittances.

Information for Employers

Information for Students:

  • Guidance on Terms and Conditions from April 2000 by the Department for Education and Skills.
  • Student Loan Company for general information about student loans or how to apply.