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Changes to Student Loan Deductions

The new tax year brings changes to the way employers deduct student loan repayments from their employees’ pay.  The changes, which affect the starting and stopping of the deduction procedure, are due to come into force on 6th April 2008.

Previously, HMRC would issue employers with form SL1, a Start Notice informing them that after 42 days of receipt of the notice they must begin subtracting student loan repayments from PAYE employees’ pay.  Similarly, when an employee’s term of employment ended, employers would receive SL2, a Stop Notice which allowed employers to cease deductions 42 days after the date of issue.

From 6th April the 42 day period will be abolished.  Instead, employers must subtract student loan repayments on the first available pay date after issue of the SL1 Start Notice and stop deductions on the first available pay date after issue of the SL2 Stop Notice.

Individuals should ensure they are aware of minor changes such as these to deduction systems, so that they remain fully compliant at all times.  By changing the first deduction to the ‘first available pay date’, HMRC are referring to the first pay date on which it is practically possible to make the deductions.  If an employer had already run a payroll, they would not be required to re-run it, but would be expected to calculate deductions from the next payroll run.

This article has been provided by UK200Group.

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