Enable student loan deductions in FreeAgent's payroll
This article explains how to add a student loan plan to a new or existing payroll profile for an employee in FreeAgent. It also explains how FreeAgent handles student loan deductions.
Please note:
- FreeAgent's payroll functionality won't be available if you have an unincorporated landlord or non-UK account type, or if you're preparing your accounts using cash basis accounting.
- FreeAgent supports all the undergraduate student loan repayment plans as well as postgraduate student loan repayments. However, if an employee has two or more undergraduate student loans covered by different repayment plans, you will not be able to use FreeAgent’s payroll to calculate the deductions. In this situation, you will need to file payroll outside of FreeAgent and create journal entries to record the payroll in your FreeAgent account.
- If an employee has more than one job, student loan deductions are calculated on each job separately as per HMRC's guidance.
- Each employee will need to be added as a user to your FreeAgent account and you'll need full (level 8) access to FreeAgent in order to either create a payroll profile for a new employee or edit an existing payroll profile.
Enabling student loan deductions for a new payroll profile
You'll enable student loan deductions as part of the process of creating a new payroll profile.
Navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.
Select ‘Add an Employee’ from the right-hand side of the ‘Employees’ section and select the employee’s name from the drop-down menu.
Scroll down to the ‘Deduct student loans?’ options in the ‘Tax & NI’ section and tick the check box for the relevant type of student loan.
If you tick the ‘Undergraduate loan’ option, you'll be prompted to select which type of repayment plan applies to the loan.
If you’re unsure which plan to select, you can refer to HMRC’s guidance for employers.
Once you’ve chosen the appropriate student loan options, enter the remaining information and select 'Create Payroll Profile' to complete the process.
Enabling student loan deductions for an existing payroll profile
Navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.
Select ‘Edit Profile’ on the right-hand side of the ‘Employees’ section next to the relevant employee’s name.
Scroll down to the ‘Deduct student loans?’ options in the ‘Tax & NI’ section and tick the check box for the relevant type of student loan.
If you tick the ‘Undergraduate loan’ option, you'll be prompted to select which type of repayment plan applies to the loan.
If you’re unsure which plan to select, you can refer to HMRC’s guidance for employers.
To complete the process, select ‘Update Payroll Profile’ at the bottom of the screen.
How FreeAgent handles student loan deductions
Once you have added a student loan plan to a payroll profile, FreeAgent will automatically deduct the appropriate amount from the employee’s payslip when you run payroll each month.
Please note that once calculated, this figure cannot be overwritten on the employee's payslip. The deduction will occur when the employee’s total pay exceeds the threshold for the selected plan.