- 19th October 2018
- Posted by: Suzy Hill
- Category: Personal Tax, Business News
Student loans – repayment threshold rises by 2.9%
The government has increased the loan repayment thresholds for student loans by 2.9% and confirmed the introduction of a postgraduate loan system deductible from PAYE effective April 2019
The increase in Student Loan Plan 1 and Plan 2 thresholds will take effect from 6 April 2019.
The thresholds of Plan 1 and Plan 2 Student Loans are increasing from April 2019 in line with inflation at 2.9%.
The current thresholds for the tax year 2018-19 are:
The Department for Education (DfE) has confirmed that from 6 April 2019 the thresholds will increase for tax year 2019/20 to:
• Plan 1 – £18,935, up from £18,300 for tax year 2018/19; and
• Plan 2 – £25,725, up from £25,000.
Student loan deductions will remain the same at 9% for Plan 1 and Plan 2 loans.
The Department for Education has launched a new student loan product known as PGL [post graduate loans]. The earliest individuals can start repayment of PGL is April 2019 through PAYE or April 2020 through self assessment.
The student loan threshold for PGL for England and Wales will be £21,000, with deductions being taken at 6%.
For anyone hiring post graduates, HMRC will send their employer a new postgraduate start notice (PGL1) to ask them to start taking PGL deductions.
Once the loan is paid off, employers will be advised by HMRC via the new Postgraduate stop notice (PGL2) asking them to stop taking PGL deductions.
Employers will collect the PGL through the normal PAYE process.
Note that individuals may also be liable to repay a Student Loan Plan Type 1 or 2 concurrently with PGL.
HMRC will let their employer know this by continuing to send the normal Student Loan start (SL1) and Student Loan stop (SL2) notices as well as PGL1s and PGL2s.
The earliest date repayment of PGL can start is April 2019.
HMRC will confirm further details about PGL compliance issues before the effective date of 6 April 2019.
HMRC guidance, Student Loan repayments : guidance for employers can be found here