Inspire Financial Management

Best viewed on a device with a bigger screen...
Tel: 0191 487 7074

student loans new procedure

The PAYE system has resulted in thousands of taxpayers over repaying their student loans. HMRC says its new procedure will help prevent this. What’s the full story?

Student loans. According to official statistics, every year around 1.5 million people borrow money through the Student Loans Company (SLC). The majority eventually go into employment and start paying off their debt. Employees’ loan repayments are taken directly from salary through the PAYE system. A longstanding bugbear with this is that there’s no clear mechanism to stop the payroll deductions when the loan has been fully repaid.

New procedure. In May 2024 HMRC announced a change that should help prevent loan over repayments through PAYE occurring, or at least keep them from getting out of hand. Following consultations, the SLC will now notify HMRC when a student’s loan has been fully repaid. HMRC will then notify you to stop making the deductions.

Trap. While the new procedure is good news, chances are that two or possibly more paydays will pass before you receive a notification from HMRC resulting in some over repayment. These cannot be refunded through the PAYE system.

Refund delays. The SLC will automatically refund over repayments in most circumstances but it can take time because it usually has to wait until after the end of the tax year in which the debt was cleared. For example, if your employee cleared their loan in June 2024, the SLC can’t begin to consider a refund until after 5 April 2025, and in practice it will take weeks or months before they see their money.Tip.Advise them to submit a claim for a refund with SLC to ensure they get their money back as soon as possible (see The next step).

HMRC guidance. HMRC has updated its guidance for taxpayers with student loans. It now includes more information about what will happen when the loan has been repaid (see The next step).

To minimise over repayments of student loans through PAYE deductions HMRC will now notify you when your employee has cleared their debt. They may still need to claim a refund from the Student Loans Company.

The next step

How to claim a refund of student loan over repayments
HMRC’s guide on student loan repayments

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.

18th Jun 2024 10:32

Student Loans

Access Key Enabled Navigation
Keywords for: New student loan procedure

inspire financial management, stockton on tees, financial management, Student Loans, accountant, accounting, gateshead