Payroll Help
You should make Student and Postgraduate loan deductions if any of the following apply:
your new employee’s P45 shows that deductions should continue
when you ask, your new employee tells you they’re repaying a Student loan
HMRC sends you form SL1 for Student loans and your employee earns more than the threshold for the relevant plan they are in.
HMRC sends you form PGL1 for Postgraduate loans and your employee earns more than the threshold for the relevant plan they are in.
Qualifying pay for Student and Postgraduate loan deductions is all NI'able pay for the pay period. This means all payments with the NI'able box selected on the relevant payment profiles on the Payroll - Maintenance - Payment Profile form.
If the qualifying pay is less than the threshold, the loan repayment value will be zero.
If the qualifying pay is greater than the threshold, the loan repayment is calculated by:
deducting the pay period's threshold amount from the qualifying pay amount
then multiplying the result by the Student loan and/or the Postgraduate loan repayment percentage. The repayment is rounded down to the nearest pound.
Postgraduate loan repayments are prioritised above Student loans, which means that Postgraduate loan repayments will always be taken before Student loan repayments. In a situation where an employee has protected earnings, this could affect Student and Postgraduate loan repayments.
Examples: In these
examples an employee normally has the following deductions:
- Student loan deduction for £100
- Postgraduate loan deduction of £150
- Attachment Order deduction for £50.
A total of £300 per month. They have protected earnings of £750.
Example 1 (reduced Student loan deduction):
The employee's qualifying pay after tax and NI for the month is £1000.
The calculated net pay for the month of £1000 – (£100+ £150 + £50) = £700
will be less than the protected earnings of £750, the Student loan amount
will be reduced by £50 so the net pay becomes £750.
Example 2 (zero Student loan deduction
and reduced Postgraduate loan): The employee's qualifying pay after
tax and NI for the month is £900.
The calculated net pay for the month (£900 – (£100 + £150 + £50) = £600)
will be less than the protected earnings of £750, the Student loan amount
will be reduced to zero and the Postgraduate loan will be reduced to £100
so the net pay becomes £750.
Student loan thresholds and rate are recorded in the Annual Threshold - Plan 1, Plan 2 or Plan 4 boxes under Student Loans on the Payroll - Utilities - PAYE/NI/Stat. Payments form. Each tax table can retain a different threshold for situations where it changes in different tax years.
The Student loan setting is on the Payroll - Processing - Bank & Details form. For any employee where either the Student Loan - Plan 1, Student Loan - Plan 2 or Student Loan - Plan 4 options are selected on that form, the calculation checks whether the employee’s pay for the period is more or less than the proportion of the relevant Student loan threshold for that pay period.
Important: Don't select the relevant Student Loan box until the first payday after the start date shown on the start notification (SL1).
The Student loan repayments to-date value is updated by the amount paid each period. The relevant boxes on the Payroll - Processing - To-Date form are updated when you use the Payroll - Utilities - Update command at the end of each pay period.
Postgraduate loans are deducted via the PAYE process in the same way as Student loans. The repayment threshold is set at £21,000 and loans will be repaid at a rate of 6%. The deductions will be based on the pay that is subject to National Insurance contributions.
A borrower may be liable to repay a Student and Postgraduate loan at the same time, as they are separate loan products. In that situation employers must deduct both Student and Postgraduate loan deductions.
PGL1 and PGL2 notices are used to start and stop Postgraduate loan deductions. These are used alongside the SL1 and SL2 notices for Student loans.
Postgraduate loans are deducted and sent in the employer’s usual payments to PAYE. Postgraduate loans will be shown separately to Student loans on an employee’s payslip.
The Postgraduate loan threshold and rate are recorded in the Annual Threshold box under Postgraduate Loans on the Payroll - Utilities - PAYE/NI/Stat. Payments form.
The Postgraduate Loan option is on the Payroll - Processing - Bank & Details form. For any employee with that option selected the calculation checks whether the employee’s pay for the period is more or less than the proportion of the relevant Postgraduate Loan Threshold for that pay period.
The to-date value for Postgraduate loan repayments is updated by the amount paid each period. The Postgraduate Loan boxes on the Payroll - Processing - To-Date form are updated when you use the Payroll - Utilities - Update command at the end of each pay period.
Important: Don't select the relevant Postgraduate Loan box until the first payday after the start date shown on the start notification (PGL1).