Student Loan Deductions: Repayment threshold increased.
Since 6 April 2016 there has been an additional repayment plan put into place for students that started their course on or after 1 September 2012. The additional repayment plan, known as Plan 2, has an increased threshold of £21,000 per year. This means that your employee will not begin repaying their student loan until they earn above £404 a week or £1,750 a month. Only once they earn above these thresholds will they be subject to 9% deductions from their Gross salary. The original repayment plan, known as Plan 1, is still in place but the annual threshold has increased from £17,335 to £17,495 for the 2016/17 tax year.
When you employ a former student, they should make you aware of the repayment plan they are on. If you are given a P45 form, you will notice that there is only one box which indicates that “Student Loan deductions are to continue”, if this box is ticked but the employee is unaware of their repayment plan, you are to automatically default to Plan 1. H M Revenue & Customs will notify you if they should be on Plan 2.
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