Redundancy Payment & Student Loan Deductions

quackie43

I'm due to be made redundant in the coming months, and my employer has offered a good redundancy package. As it is below the 30K limit, it will not be subject to Tax or NIC but my Employer is not sure if the redundancy payout will be subject to student loan deductions. I rang SLC to check and the Advisor was really not very sure, first he said that non tax deductible payments are not subject to student loan, but then he found some information on their system which confirmed that I would have to pay student loan on my redundancy at the standard 9% rate. Given that the SLC are not very certain of their own rules, I wanted to check if anyone else has had this experience before and if student loan was deducted?

daisy23169

Student loan payments are calculated on the same pay as national insurance, so if your redundancy pay is NI exempt then it won't attract student loan either.

Just bear in mind that any taxable pay in lieu of notice or accrued holiday pay will count for student loan purposes, so your student loan payment may still be higher than usual if your final pay includes these.

quackie43

Thanks Daisy!!! :-D After reading your reply I called the Student Loans Company again and was told exactly that, so my core redundancy payout will not be subject to Student Loan Deductions, only the accrued holiday and notice pay. This makes a HUGE difference to me financially, as I'd calculated that they would be deducting £1.5K of student loan contributions. It is really worrying that the SLC are not giving consistent advice on this.

That said, the second SLC Agent I spoke to was very knowledgeable and said that if my employer was unsure how to calculate my final payment then they could call the HMRC Employers' Helpline for further advice.