Student loan repayment threshold for tax year 2015-16

12 January 2015

HMRC announced in their October 2014 edition of Employer Bulletin that from 6 April 2015 the student loan threshold will rise from £16,910 to £17,335.

HMRC’s Software Developers Support Team has confirmed that the 2015-16 pay frequency equivalents for student loan borrowers in the Plan 1 Income Contingent Repayment (ICR) scheme are:

  • Annual - £17,335
  • Monthly - £1,444.58
  • 4 weekly - £1,333.46
  • 2 Weekly - £666.73
  • Weekly - £333.36.

Changes to incorporate into payroll software

In April last year we published information about student loan repayments being calculated against two thresholds from 2016. As a reminder:

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.


Student loans for post-graduates

And as a further reminder, as announced in the Autumn Statement last month, a further type of student loan will be made available to post-graduates under the age of 30 who wish to undertake a Masters degree.It is planned that these loans, of up to £10,000, will be available from 2016-17 and will be repaid concurrently with undergraduate loans. The loans are designed so that, on average, individuals will repay in full, in recognition of the high private return to individuals, but that they will beat commercial rates. It is expected that around 40,000 individuals will benefit from this new loan.

CIPP comment

Although the CIPP supports extending student loans to aid those wanting to obtain a Masters degree, as if life weren’t complicated enough, it is very likely that we will now have a third type of student loan to collect in the next few years. So far HMRC and BIS have been very proactive in working with stakeholders to ensure that the process for collecting Plan 2 student loans from 2016 will bring the least administrative burden as possible to employers.

We hope that this level of consultation continues when plans are being made for the collection of this third student loan. The policy team are involved with the student loan forum.