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If you have set-up automatic HMRC updates, any new loans being applied to existing employees will be updated automatically once the Start Notice (SL1) has been received from HMRC.
If you have set-up automatic HMRC updates, any stop notices being applied to existing employees will be updated automatically once the Stop Notice (SL2) has been received from HMRC.
If HMRC issue a start (SL1) or stop notice (SL2) Pento has to implement it by law. A student loan should not be stopped until the SL2 has been received. Any over payments can be refunded to the employee by the Student Loan Company directly, and must not be refunded in the payroll if an SL2 was issued (as per HMRC Guidance).
HMRC Guidance on stop notices and refunds
Adding a Student Loan to a New Employee
Your new employee should fill out a starter checklist, and/or provide a P45. Both documents should specify if an employee has a student loan to repay in the payroll.
Employee P45s do not specify which loan type to apply. If you are unsure, you should ask your employee; if they do not know, they can follow the guidance here, or you should default to Plan Type 1 as per HMRC guidance.
The official HMRC starter checklist asks the employee to specify their Plan type, if they are uncertain, they can follow the guidance here, or contact the Student Loan Company (SLC) directly.
Adding a Student Loan in Pento
To add a Student Loan to an employee, you will need to:
- Select the Employees section from the left sidebar.
- Select the relevant employee to view their employee profile.
- Select the Pay items tab.
- Select Add pay item.
- Select Student loans from the list of Schemes.
- Toggle on the correct Plan type.
You can watch a video of how to add a Student loan pay item to an employee here.
Frequently Asked Questions
What if I apply the wrong plan type?
If the wrong plan type is being operated for a student loan (Plan 1, Plan 2 or Plan 4), HMRC will issue an SL1 notifying the correct plan type.
What if I do not apply a Student Loan when I should have?
HMRC will issue an SL1 in the next available payroll, student loan deductions should not be backdated in the payroll, instead, the employee can make an additional payment directly should they want to.
What If I accidentally apply a Student Loan where none is due?
You can make a net refund to the employee and contact support to adjust the Student Loan Year to Dates in the payroll, the Student Loan Company will still need to be contacted.
I added a Student Loan to an employee, why are there no deductions?
Student Loans are only deducted if the employee has earnings over the threshold specific to their plan type.
What amount is the Student Loan calculated on?
Student and Post Graduate loans are calculated on any pay subject to NI. Each plan type has its own threshold and percentage rate. For Plans 1, 2 and 4, the employee will pay 9% of the amount earned over the threshold. The employee will pay 6% of the amount earned over the threshold for the Postgraduate Loan. More information on current thresholds can be found here.