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Salary Sacrifice towards Student Loan Repayments.

Can employee Salary Sacrifice for payments towards remaining Student Loan balance?

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Situation: an employee has stdent loan outstanding of about £20k.

Question 1: can the employee salary sacrifice if employer agrees to pay this on behalf of the employee?

Question 2: if salary sacrifice is not possible, what would be the tax consequences if the employer still pay this on behalf of the employee?

Question 3: if the above 2 are not possible, do you have any suggestions on how the employer can help the employee settle this?

Any contribution would be much appreciated.

Thanks for reading. Good day to all!

Replies (7)

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By Accountant A
29th Jul 2019 15:22

I thought that the tax and NIC advantages of most benefits provided as part of a salary sacrifice arrangement were removed from 6 April 2017., but then I'm not advising clients for reward.

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By Payrollgal
29th Jul 2019 16:30

Definitely can't salary sacrifice.

In the simplest terms, it's remuneration and should be tax'd and NI'd through the payroll.

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By A.Sharp
29th Jul 2019 17:09

Cheers Payrollgal. Can it be done as BIK then? so employee can save on NI..

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By Payrollgal
29th Jul 2019 17:26

'Fraid not!

When an employer settles a pecuniary liability (paying a bill that is the employees liability, and crucially in the employees name - which I imagine this will be) then the class 1 NI will still go through the payroll.

The end result is the same, just the additional task of completing and filing a P11D.

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By paul.benny
30th Jul 2019 14:32

I'd recommend taking a look at moneysavingexpert.com on dealing with student debt (under the income and family menu). Martyn Lewis has taken a keen interest in this. Whilst I've not studied his analysis, broadly he argues that early repayment is usually a bad idea.

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By A.Sharp
06th Aug 2019 16:11

thanks, i will have a look at that, but i doubt i will agree with that..

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Hallerud at Easter
By DJKL
06th Aug 2019 16:37

Only if there is likely to be perpetual debt which will end up being written off- where student loans are more modest and earnings higher you might as well clear it out early as it is going to be repaid in full- the interest charged being higher than that earned re excess funds on deposit.

For instance my son is currently 27 (28 in October) and his student debt will likely be fully repaid by next summer, after working for six - seven years after graduation. Given it is certainly going to be fully repaid he likely would be better writing a cheque today to clear the £2k-£3k balance left.

On the other hand my daughter might never fully repay her debt, she has more debt than her brother did and is unlikely to earn as much, in her position Martyn Lewis might well be correct.

It is like tax planning, there is not one size fits all.

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