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
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.
Student Loans
There are three types of student loan and each has a threshold after which deductions will made.
Student loan and postgraduate loan recovery
If your employees’ earnings are above the earnings threshold, record their student loan and postgraduate loan deductions in your payroll software. It will automatically calculate and deduct repayments from their pay.
Rate or threshold | 2023 to 2024 rate |
|---|---|
Employee earnings threshold for student loan plan 1 | £22,015 per year £1,834.58 per month £423.36 per week |
Employee earnings threshold for student loan plan 2 | £27,295 per year £2,274.58 per month £524.90 per week |
Employee earnings threshold for student loan plan 4 | £27,660 per year £2,305 per month £531.92 per week |
Student loan deductions | 9% |
Employee earnings threshold for postgraduate loan | £21,000 per year £1,750 per month £403.84 per week |
Postgraduate loan deductions | 6% |
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 and edit tax settings - select which student loan to apply 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 and edit tax settings - select No to remove the student loan or choose No to remove 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.