Payroll and student loans

[NikkiJane]

I'm confused, and I hope someone can explain to me how this works.
I have an employee with a plan 1 student loan. From what HMRC say, he should be able to earn about £2,000 a month before student loan payments have to be deducted from payroll.
His hours are very variable and he is paid an hourly rate.
This month his payment is due to be £1,750, but there is a £43 student loan repayment on his payslip.
He's bound to ask me 'how come?', so does anyone know why this has been deducted when he is below the threshold? Or anywhere I can read up on how it works in practise? HMRC guidance is not helping.
Previous months this tax year have been below £1000.
Thanks in advance.

 

[Paul Kelly ICHYB]

I am sure some of the great people here will give some solid advice, but I have to ask... what did your accountant say?

 

[NikkiJane]

I don't have one. We're a micro business so I do everything myself. TBH it was hard to get any of the local accountants to even talk to me when we first set up!

 

[Paul Kelly ICHYB]

Well, they are a lot more chatty here!

 

[DontAsk]

I don't have one. We're a micro business so I do everything myself.

So what led you to make the decision on payroll? Which software are you using?

 

[Newchodge]

I don't have one. We're a micro business so I do everything myself. TBH it was hard to get any of the local accountants to even talk to me when we first set up!

Without seeing all the payments this year and how you have set up your payroll, it is impossible to comment.

 

[UK Contractor Accountant]

Student Loan Calculator

Calculate your Student Loan Repayments, debt you will graduate with and more, for Plan 1, 2, 4, 5 and Postgraduate loans.

www.student-loan-calculator.co.uk

 

[elaine@cheapaccounting]

Perhaps call your payroll software provider to check everything is set up correctly - although hopefully that's not HMRC as they will never answer the phone

 

[elaine@cheapaccounting]

I don't have one. We're a micro business so I do everything myself. TBH it was hard to get any of the local accountants to even talk to me when we first set up!

I'm sorry you had such a bad experience with your local accountants. We're not all like that

 

[NikkiJane]

So what led you to make the decision on payroll? Which software are you using?

HMRCs basic PAYE tools.

 

[NikkiJane]

Perhaps call your payroll software provider to check everything is set up correctly - although hopefully that's not HMRC as they will never answer the phone

Unfortunately it is HMRC! I use their basic PAYE.

 

[NikkiJane]

Cheers. Yes, that absolutely shows that my thought was right. he shouldn't be paying anything.

 

[elaine@cheapaccounting]

Unfortunately it is HMRC! I use their basic PAYE.

Good luck

 

[Bobbo]

I'm confused, and I hope someone can explain to me how this works.
I have an employee with a plan 1 student loan. From what HMRC say, he should be able to earn about £2,000 a month before student loan payments have to be deducted from payroll.
His hours are very variable and he is paid an hourly rate.
This month his payment is due to be £1,750, but there is a £43 student loan repayment on his payslip.
He's bound to ask me 'how come?', so does anyone know why this has been deducted when he is below the threshold? Or anywhere I can read up on how it works in practise? HMRC guidance is not helping.
Previous months this tax year have been below £1000.
Thanks in advance.

A £43 student loan repayment equates to £478 of income over the threshold (9%). The repayment threshold is 2,172 per month so it seems your payroll software thinks this person is getting 2,650 this month. I assume you've checked the software is showing the correct amount of gross pay?

 

[Newchodge]

HMRCs basic PAYE tools.

That is the beginning of your problems.

 

[numbersrule]

I've posted another thread a couple of weeks ago about this point I am about to make.

The bookkeeping and accounting sector and payroll sector for that matter really suffers I believe from a lack of structure and guidance.

The lack of structure and guidance manifests itself in a number of different ways.

One of those ways is the way in which all the software seems so chaotic and uncoordinated.

There should be a British Standard for the design and implementation of accounting software.

But there isn't.

And that explains why this thread seems to have been unhelpful.

I am not blaming individual posters, it is just that when there is a lack of structure and guidance you end up with general chaos.

 

[Newchodge]

And that explains why this thread seems to have been unhelpful

I am afraid I don't agree. The thread is unhelpful because there is insufficient information to give any meaningful advice. The software shows a student loan payment should be made, the OP knows that is wrong. Either the software is at fault, which is unlikely, or it has been wrongly setup or wrong figures have been entered.

Unless you know what you are doing setup errors occur. Indeed they occur even if you do know what you are doing, but then you can spot there is an error. A British Standard for the design and implementation of accountancy software would not solve that issue.

 

[Newchodge]

I've posted another thread a couple of weeks ago about this point I am about to make.

Would you mind tagging that, as I don't remember seeing it and it is a subject that interests me. Many thanks.

 

[DontAsk]

There should be a British Standard for the design and implementation of accounting software.

Why? It already has to meet all the accounting principles, otherwise it simply would not work.

As Cyndy says, something has gone wrong in this one individual case v. millions that work just fine.

I use HMRCs BPT and find it perfect for my needs but I cannot help as I don't have to handle student loan deductions.

 

[NikkiJane]

Without seeing all the payments this year and how you have set up your payroll, it is impossible to comment.

I am afraid I don't agree. The thread is unhelpful because there is insufficient information to give any meaningful advice. The software shows a student loan payment should be made, the OP knows that is wrong. Either the software is at fault, which is unlikely, or it has been wrongly setup or wrong figures have been entered.

Unless you know what you are doing setup errors occur. Indeed they occur even if you do know what you are doing, but then you can spot there is an error. A British Standard for the design and implementation of accountancy software would not solve that issue.

I had tried to post images to show the way I have the software setup. I believe it to be right - Plan 1 student loan, all dates are correct, amount owed is correct. I can't see anything that might be wrong. But I this site tells me that I can't post images, and that I can't post links, so I can't see how I can give you sufficient information.

 

[Newchodge]

I had tried to post images to show the way I have the software setup. I believe it to be right - Plan 1 student loan, all dates are correct, amount owed is correct. I can't see anything that might be wrong. But I this site tells me that I can't post images, and that I can't post links, so I can't see how I can give you sufficient information.

Have you paid the employee more than once in a PRP? Your first post mentions "previous months this tax year". Generally end May would be the second month's payment. You posted on 3 June. What date were the previous payments made? What is your PRP?

 

[NikkiJane]

Have you paid the employee more than once in a PRP? Your first post mentions "previous months this tax year". Generally end May would be the second month's payment. You posted on 3 June. What date were the previous payments made? What is your PRP?

Pay period is first to last working day of the month, usually actually paid 2-3 working days after the period ends. Pervious payments have been £690 on 6th April (for March), £900 on 6th May (for April) and £1700 going out today (for May). I always put the date of payment in Basic PAYE as the actual day on which the bank transfer is made, not the last day of the pay period. Could that be what I'm doing wrong?

 

[Newchodge]

Pay period is first to last working day of the month, usually actually paid 2-3 working days after the period ends. Pervious payments have been £690 on 6th April (for March), £900 on 6th May (for April) and £1700 going out today (for May). I always put the date of payment in Basic PAYE as the actual day on which the bank transfer is made, not the last day of the pay period. Could that be what I'm doing wrong?

Yes. The tax month starts on 6 of each month. So when you paid on 6 May and then ran the process on 3 June the system added the 2 payments together for the month of May. You really ought to have a standard payment date, especially as you are paying so close to the 5/6 tax month boundary.

 

[NikkiJane]

Yes. The tax month starts on 6 of each month. So when you paid on 6 May and then ran the process on 3 June the system added the 2 payments together for the month of May. You really ought to have a standard payment date, especially as you are paying so close to the 5/6 tax month boundary.

Great! Thank you so much for that, that's really helpful. I will address that.

 

[David Griffiths]

If it's going out today, that will be in month 3, so when you calculate the payslip it should show no SL repayment. Your original problem was reported on Tuesday, which would have been the second payment in month 2

 

[Newchodge]

Why? It already has to meet all the accounting principles, otherwise it simply would not work.

As Cyndy says, something has gone wrong in this one individual case v. millions that work just fine.

I use HMRCs BPT and find it perfect for my needs but I cannot help as I don't have to handle student loan deductions.

I am starting a thread about monthly payroll as I believe there is a pretty fundamental problem with the way most people are paid. @numbersrule you may be interested, as it is true that there is no proper guidance on how properly to calculate salaries.