April 2021 sees the introduction of the Scottish Student Loan deduction with the new Student Loan Plan 4. As a result the New Starter Checklist (historically known as form P46) is being revised with easier and more straightforward and combined Student Loan and Postgraduate Loan questions referenced as Question 9 and 10.
The New Starter Checklist is required for all new employees (and has been since the introduction of Real Time Information back in April 2013).
If a new employee does not present form P45, then the employer is required to request the employee to complete the New Starter Checklist to identify themselves and to obtain the correct tax code instruction to be applied on their first payment. Failure to complete results in Tax Code 0T being applied and declaration type C which indicates to HMRC that the individual has multiple jobs (this is considered by HMRC to be an employer error!).
If a new employee does present form P45, where the Continue Student Loan box is indicated, then the employer is required to have their new employee also answer the Student Loan and Postgraduate Loan questions on the New Starter Checklist.
Where a P45 is presented, then generally the employer is expected to answer the A. B, C choice question based on the date of the P45 form (whether it is current or stale) and the tax code declared on the P45. The employer may also need to apply a tax code uplift as instructed by form P9X (which is a general instruction to all employers).
As a general principle, a P45 provided is declared by the employer as new starter type B unless the tax code is: BR, 0T, D0, D1, D2 (and their Scottish [S] and Welsh [W] equivalents, in which case the new starter should be declared as type C.
The Student Loan questions?
Question 9 – do they have a student loan that requires repayment?
Question 9 is establishing if the employee has Student Loans or Postgraduate Loans that require deductions from pay.
Caution – graduates are not liable for deduction until the following 6th April. They often tick No in error which the causes later corrective refund activity.
Question 10 if they do which type?
April 2021 sees the introduction of Plan 4 for Scottish student loan repayments. These previously were aligned with Plan 1.
With cross devolved nation movement, it is possible that multiple types may apply to an individual. There will be English graduates with both Plan 1 and 2 loans. They may also have a postgraduate loans as well. However, only one of Plan 1, 2 or 4 is applied at a single time. Postgraduate repayments can also occur alongside or operate on their own.
So what student loan type is applied to payroll
Only apply a student loan deduction if Question 9 answer is NO.
Employer need to take care with the Student Loan entries, of employees tick more than one plan type, then only one type of studen loan deduction is started based on the following logic sequence alongside any postgraduate loan if selected:
- No plan selected nor post graduate loan selected = Apply Plan 1
- Plan 1 selected only = Apply plan 1
- Plan 2 selected only = Apply plan 2
- Plan 4 selected only = Apply plan 4
- Plans 1 & 2 selected = Apply plan 1
- Plans 1 & 4 selected = Apply plan 1
- Plans 1, 2 & 4 selected = Apply plan 1
- Plans 2 & 4 selected = Apply plan 4
If postgraduate is selected either on its own or with other then apply postgraduate.
The draft New Starter Checklist for April 2021
PAYadvice.UK has been involved in the consultation on the revisions of the New Starter Checklist via the Collection of Student Loan Consultation Group and the Employment and Payroll Group. The draft is potentially subject to further adjustments prior to general release on GOV.UK.
A Proposal was made for Q9 and Q10 to be combined and for more clear employer instruction. The new form does simplify the questions considerable, however, the employer instructions are still not present.
There is likely to be a transition period of old and new which cause added confusion, especially with the introduction of the Scottish Plan 4.
PAYadvice.UK 28/12/2020 updated 31/12/2020