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Student loans for 2021-22

Starting from 6 April 2021, there is a new type of undergraduate student loan that employers need to be aware of when operating payroll – the Plan 4 loan (SLP4). The new plan type has been necessary due to the Scottish government amending certain details regarding repayment, including the increase of the earnings threshold. SLP4 will apply to all new and existing Scottish borrowers. This means that Scottish borrowers that were in repayment before 6 April 2021 using the Plan 1 (SLP1) arrangements will need to be moved across to SLP4.

The new plan is applicable to any individual that received a loan from the Student Award Agency for Scotland. Whether they live in Scotland or not is irrelevant.

The Student Loans Company will inform HMRC about individuals that need to be moved from SLP1 to SLP4, and HMRC will contact employers. However, it is also possible for the employee to prompt the employer to change the plan type being used for repayment. This is important as the repayment thresholds are different across the different loan types. For 2021-22, the appropriate thresholds and repayment rates are as follows:

Plan type
Plan 1
Plan 2
Plan 4
Postgraduate
Earnings threshold
£19,895
£27,295
£25,000
£21,000
Rate of deduction applied to excess
9%
9%
9%
6%

An employer should not operate student loan deductions for off payroll workers, even if the status determination is that they are a deemed employee. Instead, the worker will make good the appropriate deductions via their self-assessment tax return.

The earnings that are subject to deductions is the NIable pay. This can be different from the taxable pay, for example where there is an optional remuneration arrangement in place. Additional earnings from commission, overtime, or bonuses increase the deductions accordingly.

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