HMRC issue guidance points on Plan 2 student loans

03 July 2015

HMRC Software Developer Support team have issued brief guidance for software developers about the operation of Student Loan deduction under Plan 2, which will begin from April 2016 for the employers of borrowers in England or Wales who began the first year of their course on or after 1 September 2012.

  1. From 6th April 2016 there will be two types of Student Loan deduction. Deductions taken under the current scheme will be known as Plan type 1 and there will be a new type of deduction called Plan Type 2. This new Plan Type 2 deduction applies to borrowers in England or Wales who began the first year of their course on or after 1 September 2012.
  2. The plan type to use for new student loan deductions will be shown on the SL1 start notifications. SL1 notifications for Plan Type 2 will first be issued in March 2016 for repayments starting from 6 April 2016.
  3. For new employees the plan type will be an option to complete on the Starter Checklist but it will not be shown on form P45.
  4. Employers will only ever have to deduct either Plan Type 1 or Plan Type 2 deductions. It is possible for employees to have both types of loan, but only one plan type will be in operation at any one time. Allocation to the two loan types will be done by the Student Loans Company therefore this allocation process is not visible to the employer or HMRC. The employer only has to apply the plan type deduction as informed by the start notification or the starter checklist.
  5. Any plan type change will be advised via a new start notification stating the new plan type to operate.
  6. If a new employee does not know the plan type they should contact the Student Loans Company or check here. However, if for whatever reason the employee has not been able to establish the plan type then a Plan Type 1 should be operated until confirmation is received from the employee or HMRC via the start notification.
  7. There will be no change to current reporting requirements in RTI. Plan type is not reported, only the amount.
  8. The deduction rate for both plan types will be 9%.
  9. The 16/17 threshold for Plan Type 1 is usually announced by the Dept. for Business, Innovation & Skills (BIS) in August but the Plan Type 2 threshold has been announced and will be £21,000.
  10. The method for calculating the Plan Type 2 deductions is the same as the current Plan Type 1 deductions except that a different threshold is used.

If you have any questions that you would like to put forward to the CSL forum please contact Samantha Mann via policy@cipp.org.uk