SLC Interest on money that is deducted

banzsolt

Hi,

I just realized today when I got my SLC statement that I am charged monthly a 3.1 (or 3.3%), but they reclaim my tax from HMRC only on the 31st of March of each year. In the meantime, my account is incurring a compound interest, but they do not apply this interest on the money they get from HMRC. Did anybody else notice this? This means that actually we are ending up with more than the 3.1% or 3.3% /year.

The other strange thing is their interest rate. Let's take my example:
Starting at 30023.64 in March, interest at 3.1% => April interest ends up at 87.27.
According to my calculation 30023.64 * 3.1% / 365 * 30 = 76.49. I thought that this is a mistake only because it might have been the first month, but no, it keeps going each month.

I am planning to stop my tax deduction and start setting up a direct debit like this winning the compound interest that seams they are charging us.

Anybody else had any experience with this?

Lokolo

The interest is recalculated after HMRC send details onto SLC and applied when it is paid.

Changing to Direct Debit makes no difference apart from the fact the calculations are more accurate at any one time, rather than after the recalculation.

You used to be able to update your records during the year online, not sure if you are still able to do this.

I am pretty sure you can request how they have calculated it though.

badmemory

I thought there was no refund of deductions unless there should have been no payment at all.

Lokolo

badmemory wrote: »

I thought there was no refund of deductions unless there should have been no payment at all.

You can choose to pay by direct debit instead of it coming out of your payslip. But I am only aware that this can be done when your payment period is less than 2 years to go.