With effect from the 2016 to 2017 tax year there are two plan types for student loan repayments. Plan 1 has a 2016/17 threshold of £17,495 (£1,457 a month or £336 per week), while plan 2 has a threshold of £21,000 (£1,750 a month or £403 per week).

Employers should start making student loan deductions from the next available payday using the correct plan type if any of the following apply: a new employee’s P45 shows deductions should continue; a new employee says they are repaying a student loan; a starter checklist shows a student loan, or HMRC sends form SL1 ‘Start Notice’.

Form SL1 will confirm which of the two plans apply for that employee, but in all other circumstances employers should check with the individual as to which plan they are on.

The HMRC guidance advises that if an employee does not know which plan type they’re on, they should be told to contact the Student Loan Company (SLC). If they are still unable to confirm their plan type, employers should start making deductions using plan type 1 until they receive further instructions from HMRC.

Employers who receive a form SL1 start notice for someone they have never employed are advised to  phone the employer helpline so HMRC can investigate.

Employers who receive a start notice for someone who claims never to have had a student loan are advised to start making deductions, in line with the SL1 start notice,  and to continue doing so unless told otherwise by HMRC.

When an employer receives a start notice for someone for whom they are  already making deductions, they should  check the plan type, and if it is different to the one they are currently using, update he payroll software and start making deductions using the new plan type at the next available pay day.

If  the plan type is the same as the one  currently in operation, then the employer should continue to make deductions and file away the start notice.

Overpayments

In cases where the employee thinks they have overpaid their deductions they should contact the  SLC. Employers are advised they should not make any deductions in arrears.

HMRC’s updated advice also considers what employers should do in circumstances where they have made errors in deducting student loan repayments.

If an employer has made an over or under deduction and it can be repaid or collected to or from the borrower during the current tax year, the employer should do so, amending the Year-To-Date payroll records. If this is not possible, the employer should phone the employer helpline.

HMRC advises that during each period employers can only collect an additional amount less than, or equal to, the amount that is due to be deducted in that period.

If payment changes relate to a previous tax year, if the employer has submitted the final Full Payment Submission for that year here is no need for any further action. The employee should contact their HMRC office in the case of an over-deduction and the SLC in the case of an under-deduction.

If an employer has not submitted the final Full Payment Submission for that year for any over-deductions they can repay the employee and amend their records so the final Full Payment Submission reflects the correct amounts. For under-deductions no action is needed as repayment of the balance of the loan will be covered by future deductions.

The updated HMRC guidance on student loans for employers is here