From April 2017, interest rates for plan two student loans will be charged based on income with HMRC stating that public authorities are not required to deduct student loan repayments despite IR35 reform to contractors in the public sector
From 6 April 2017, reforms to off-payroll working in the public sector resulted in changes to the way public sector authorities, agents or other third parties pay for services from individuals engaged through an intermediary.
Public authorities etc. are not required to deduct or report student loan payments from individuals, instead the payments will be calculated and deducted from the individual’s self assessment return based on their total income.
If a student loan start notice is received for an individual, no action needs to be taken.
From April, interest rates for plan two student loans, loans taken out on or after 1 September 2012, will be based on an individual’s income.
The interest rates for plan two student loans are as follows:
| Circumstances | Interest Rate |
| Whilst studying and until the April after leaving the course | RPI, plus 3% (4.6% for 2016/17) |
| From 6 April after leaving the course until the loan is repaid in full | Variable rate dependent upon income. RPI (1.6%) where income is £21,000 or less, rising on a sliding scale up to RPI+3% (4.6%) where income is £41,000 or more |
| If you don't respond to SLC's requests for information or evidence | RPI plus 3% will be applied to your loan, whatever your income, until SLC have all the information |
The income information is taken from the full payment submissions made and is passed to HMRC by the Student Loans Company.
Currently, the student loan repayment thresholds are set at £17,775 for plan one student loans and £21,000 for plan two.
More information on repaying a student loan is available here.
