Some employees may have a student loan and/or a postgraduate loan that needs to be deducted every pay run. Once set up in Shape, the software will automatically calculate this for you every time you pay the employee.
Earning thresholds for 2022/23
The yearly thresholds are broken down depending on the pay frequency. If the employee is paid monthly, then the monthly threshold is used to calculate how much the employee should pay. If they go over the monthly threshold, then a deduction will be made on earnings over that threshold.
There are three types of student loan and each has a threshold after which deductions will made.
The thresholds for 2022/2023 tax year are:
Plan 1 – £20,195 annually (£1,682.91 a month or £388.36 a week)
Plan 2 – £27,295 annually (£2,274.58 a month or £524.90 a week)
Plan 4 – £25,375 annually (£2,114.58 a month or £487.98 a week)
Employees pay 9% of the amount over the threshold.
Postgraduate loans (PGL)
£21,000 (£1,750 a month or £403.84 a week)
Employees repay 6% of the amount they earn over the threshold for PGL.
Starting a student or postgraduate loan deduction
You may be notified that an employee has a student loan or postgraduate loan in the following ways:
You have been given a P45 that shows that a student loan or postgraduate loan was being deducted. - You will need to ask the employee to confirm which type of loan it is.
Your employee tells you they are repaying a loan - you need to get the employee to confirm which type.
You receive a starter checklist from a new employee that tells you which loan needs deducting.
HMRC sends you a SL1 'Start Notice' or PGL1 'Start Notice'. This is usually to be applied from the next pay period.
Applying a student or postgraduate loan
If you need to apply a student or postgraduate loan deduction, go to the employee details under tax settings - select which student loan or choose yes to postgraduate loan. Shape will start calculating from the next pay period.
If you have an off-payroll worker, you do not need to deduct student or postgraduate loans.
Stopping a student or postgraduate loan
If you need to stop a student or postgraduate loan deduction, go to the employee details under tax settings - select which no to remove the student loan or choose no to postgraduate loan. Shape will stop calculating from the next pay period.
The only time you should stop a student or postgraduate loan is if you receive a stop notice from HMRC or the employee dies. You cannot stop deductions if your employee tells you to.