Tax Questions and Answers
A new employee has told me that they have a student loan. What do I need to do about this?
Student loans provided through the Student Loan company are collected through the UK tax system. How much, if anything, is paid is determined by the former student’s current income. When this individual is employed the repayment amount is calculated by the employer and paid with their other PAYE liabilities.
There are two types of Student Loan for ordinary degrees, with the type determined by where a person studied and when they first applied for a loan. Repayments for both of these plans are 9% of income above the relevant income threshold.
• Plan 1 – Applies to all students in the UK unless they have a Plan 2 loan
• Plan 2 – Applies to students in England and Wales who started studying after 1 September 2012
If an individual also undertook a postgraduate degree then they could also have postgraduate loan. Repayments on these are 6% of the income above the relevant income threshold.
If someone has more than one student loan, then repayments for all of them should be deducted from pay as appropriate.
The current income thresholds for the three loan types are as follows below.
A new employee with a student loan should tell you what type of loan they have. This information appears on both P45s from previous employers and the standard new employee starter list. If they are unsure they can also contact the Student Loan company to check. HMRC will also issue Student Start notices (form SL1 for Plan 1 and 2 loans and form PGL1 for postgraduate loans) when their records show that an individual should be subject to loan payments.
Provided the correct loan type is entered in an employee’s record, all good payroll software will calculate the amount to be deducted.
I am taking on some additional people to deal with a seasonal rush. Do these temporary workers need to be put on my payroll?
Some industries, such as crop-picking, have busy periods at certain times of year where they require additional temporary staff. Even though such staff are only likely to be employed for short periods, all the requirements regarding permanent employees apply. You will need to get them to fill out a new starter form, deduct PAYE and NIC as appropriate and report payments to them through RTI.
These employees will also be potentially eligible for auto enrolment in the workplace pension scheme. The usual rules apply for determining whether an employee should be enrolled in the scheme. Undertaking this exercise can seem like a waste of effort for staff that are only going to be present for a brief period of time. Fortunately there is a solution. The auto enrolment rules allow an employer to postpone this assessment by up to three months. This reduces the immediate obligations regarding giving a letter to affected employees notifying them of the postponement and their general auto enrolment rights. If you know temporary staff will be with you for three months or less then this will deal with the problem entirely.
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