Student Loans ? changes to incorporate into payroll software

15 April 2014

HMRC’s Software Developers Support Team (SDST) have provided an update on the changes that will need to be incorporated into your payroll software.

Currently in student loans we have an annually increasing threshold limit that software developers need to know about to update their payroll software. The detail comes from the Department for Business, Innovation and Skills (BIS) who are responsible for student loan policy and legislation.

From April 2016 repayments will be calculated against two thresholds depending on the year and where in the UK the loan was taken out. This note is to make you aware these changes will need to be incorporated into your payroll software. Software developers are being notified as early as possible in order that software changes can be made in time for 6 April 2016.

In addition to the existing threshold, currently (£16,910) a new threshold (£21,000) will be introduced to the student loans repayment process to handle the collection of the new Higher Education loans (England and Wales only) and accommodate 24+ Advanced Learning loans (England only).

Loans taken out with the £16,910 threshold will be referred to as ‘Plan 1’ and those with the new £21,000 threshold will be referred to as ‘Plan 2’.

Student loan deductions will only be made on one plan type at any time and can change between plan types in-year.

Employers will need the capability to make sure they know which threshold should be applied from 6 April 2016 to make the student loan deductions for either Plan 1 or Plan 2 loans and to return the repayment information into HMRC as they do currently through their payroll submissions.

During the tax year 2015-2016 HMRC will send out three types of start notifications:

  1. Existing start notifications for starts from 6 April 2015
  2. New start notifications issued for starts from 6 April 2016 stating the borrower repayments should be based on Plan 1
  3. New start notifications issued for starts from 6 April 2016 stating the borrower repayments should be based on Plan 2

Notifications stated in 2 and 3 will be issued in sufficient time to allow employers to start deductions from 6 April 2016.

Further information, guidance and updated specifications for the SL1 message will be issued nearer the time.