Student Loan Deduction ThresholdThursday, March 24th, 2011
The current £15,000 annual threshold for student loan deductions through the payroll was due for review by the last Government in 2011. The Coalition government decided instead to increase the threshold annually between 2012 and 2016 in line with inflation. The statutory changes for this have been made by means of amendments to the Education (Student Loans) (Repayment) Regulations 2009 and are effective from 6 April 2011.
The current £15,000 threshold continues to apply throughout 2011/12. For the 2012/13 tax year and the following three tax years, it will be increased in line with the Retail Prices Index (RPI). The new threshold for each year will be calculated using the percentage increase in the RPI at the March “immediately before the commencement of the previous tax year”, rounded up to the nearest £5. For example, if the year-on-year RPI increase at March 2011 is 4.4%, the threshold from April 2012 will be £15,660 (or perhaps £15,665).
Although not yet set in legislation, the government’s intention is to set the threshold at £21,000 in April 2016, the date when most students who commence a three-year degree course in September 2012 will first become liable to make repayments.