How to Deduct Student Loan Repayments

Student loan deductions are included as part of PAYE, which is handled by the tax codes.

From the File menu select Open Employee and choose the employee you want to edit. The employee's Tax Code is displayed on the Employee Details tab.

If your employee is on code M, set the Tax Code to "M SL".
If your employee is on code ME, set the Tax Code to "ME SL".
If your employee is on code S, set the Tax Code to "S SL".
If your employee is on code SB, set the Tax Code to "SB SL".
If your employee is on code SH, set the Tax Code to "SH SL".
If your employee is on code ST, set the Tax Code to "ST SL".

By default, Student Loan repayments are calculated at a rate of 12% on income over the pay period repayment threshold for primary employment earnings. For secondary income, Student Loan repayments are calculated at a rate of 12% on the gross payment of salary or wages, i.e. the repayment threshold does not apply.

If you need to deduct repayments at a specific percentage, you can specify a value in the Student Loan Rate field on the Employee Details tab. This field is only available when a Tax Code ending in SL is selected. For example, if the employee has applied for and been issued with a Special Deduction Rate certificate, they can have their Student Loan deductions taken at a rate lower than 12%.

NOTE: If you need to make additional Student Loan repayments, do not alter the Student Loan Rate; instead use the SLCIR or SLBOR settings.

Alternatively, you can override the PAYE amount:

From the File menu select Open Employee and choose the employee you want to edit.
Select the Standard Pay tab and click the PAYE button to open the PAYE window.
Select the Override PAYE option and enter dollar amounts.
Click Save or press F10 to save.

If you increase the student loan deduction, you must also increase the tax by the same amount. If the gross taxable varies between pay periods, you will have to override the PAYE in each Current Pay.

Additional Repayments

Employees may make additional Student Loan repayments, either voluntarily to repay their loan faster, or because they have been required to by Inland Revenue. Additional repayments are made under a separate tax code: SLBOR for voluntary repayments and SLCIR for compulsory repayments.

NOTE: It is possible for an employee to make deductions under both the SLCIR and SLBOR tax codes at the same time.

Voluntary Repayments

Student Loan borrowers can choose to make additional deductions to pay off their loan quicker. The borrower must inform their employer that they want to make additional deductions; the employer must then set up these deductions using the SLBOR tax code:

Open the Employee Maintenance window for the employee.
If the employee is not already using a Student Loan tax code (one that ends in "SL"), select the appropriate code for them. When a Student Loan tax code is selected, extra options relating to Student Loans appear.
Click the editing button next to the SLBOR tick box. The SLCIR/SLBOR Settings window appears with the SLBOR tab selected.
Tick the Apply SLBOR box to enable additional repayments under the SLBOR tax code.
Tick Make a part deduction if the employee wants to make a part deduction in cases where their Net Pay isn't sufficient to cover the full amount of the deduction. (If this box is not ticked, and the employee's pay does not cover the deduction amount, no deduction will be made.)
Select a deduction method:
- Choose "Fixed Dollar Amount" to deduct a set amount each pay period.
- Choose "% of Gross Pay" to deduct a set percentage of the employee's Gross Pay each pay period.
- Choose "% of Gross Pay over Threshold" to deduct a set percentage of the portion of the employee's Gross Pay that is over the student loan repayment threshold each pay period.
Enter the amount or rate to deduct.
Click Save.

Compulsory Repayments

If a Student Loan borrower has fallen behind in their repayments, Inland Revenue may decide to recover the shortfall via additional deductions. In this case, Inland Revenue will notify the borrower and the employer that additional deductions are required, and provide information detailing the rate that the additional deductions should be made at, and the total amount to be recovered. The employer must then set up these deductions using the SLCIR tax code:

Open the Employee Maintenance window for the employee.
If the employee is not already using a Student Loan tax code (one that ends in "SL"), select the appropriate code for them. When a Student Loan tax code is selected, extra options relating to Student Loans appear.
Click the editing button next to the SLCIR tick box. The SLCIR/SLBOR Settings window appears with the SLCIR tab selected.
Tick the Apply SLCIR box to enable additional repayments under the SLCIR tax code.
If the employee is using the STC tax code, an Ignore Threshold checkbox will be available. Inland Revenue will specify whether or not the student loan repayment threshold should be applied or ignored; set this checkbox accordingly.

Enter the rate to deduct additional repayments at, as specified by Inland Revenue. The rate entered here is the percentage of the employee's gross earnings, and will be between 1% and 5%. Inland Revenue may specify the rate as a percentage of the normal Student Load repayment, in which case you should enter the equivalent rate as per the table below:

Percentage of Student Loan repayment	Percentage of gross earnings
41.67%	5%
33.33%	4%
25%	3%
16.67%	2%
8.33%	1%

Enter the total amount to be recovered, as specified by Inland Revenue.
Click Save.

NOTE: Once repayments have started, you can check the Remaining balance field on the SLCIR/SLBOR Settings window to see how much is still to be repaid.