Student Loan Overpayment Refund

aplcomms

I am a frequent follower of Martin Lewis’s TV shows and the Money Saving Expert website.

I have discovered something that I believe needs to be addressed in future TV shows, on your website and with HMRC.

A family member went to University from 2012-2015 and accumulated Student Loans and interest totalling £29, 447.63 at 5 April 2015.

She started a new job afterwards earning a basic wage of £344.42 per month plus overtime.  The payroll department were very slow at processing the overtime payments and this resulted in lump sum overtime payments being made.  In one month (31 August 2016) she received the £344.42 basic pay and 310.9 hours of overtime pay totalling £3,076.76.  Her total pay for the month was £3,421.18.  This is more than the £1,750 per month threshold for Student Loan Repayment, resulting in £150 being deducted for that month.  Her Student Loan statement for 2016-2018 shows that £275 was repaid (and deducted by PAYE) on 31 March 2017.

The Student Loan Deduction was made on 31 August 2016 and interest was accumulating on the account until 31 March 2017.  She was deprived of the money, and interest accrued on it whilst it was sitting in HMRC’s bank account.  It should have been forwarded to the Student Loan Company immediately to reduce the amount of interest accruing on the Student Loan Account.

She accepted that the Student Loan Repayment of £275 was due and did nothing about it.  That is until I helped her with her finances.

 We logged into the Student Loan Account and found the £275 payment amongst the statements.  We were unable to find her P60 for that year but were able to locate her Annual Tax Summary for 2016-2017.  This contained details of her Taxable Income, Income Tax and NI but no details of Student Loan Repayments.  Her total taxable income for that year was £19,650.43 which is less than the £21,000 threshold for 2016-2018.

This meant that she was due a repayment of the £275 that was deducted through PAYE.  She was unaware that she could claim the overpayment.

 Yesterday she messaged @SLCRepayments on Facebook Messenger and attached a copy of her Annual Tax Summary as evidence.  SLC responded quickly and said that the repayment would be made to her bank account within 4-6 working days.

May I suggest that Martin Lewis does an article drawing viewer’s attention to what they need to do when they get their final payslip or P60 each year.  He needs to advise them to check through all their payslips and total all the Student Loan Deductions that have been made.  They can also get this information online in their Student Loan Company account.

If their taxable income for the year is less than £21,000 (2016-2018), £25,000 (2018-2019), £25,725 (2019-2020), £26,575 (2020-2021), or £27,295 (2021-2022) then all of their Student Loan Deductions can be reclaimed via @SLCRepayments on Facebook Messenger.

If their total taxable income is greater than the threshold then they need to subtract the threshold from the taxable pay and multiply by 0.09.  This figure is the Student Loan Repayment due.  If this figure is less than the total that has been deducted through PAYE then a repayment of the difference is due.

I feel that HMRC should adapt their Annual Tax Summary statements to include a statement on the total Student Loan deductions, how much is actually due and a note advising the taxpayer if a repayment is due, together with instructions on how to reclaim it.

I imagine that there are many thousands of people who have overpaid their student loans due to instances such as she has experienced.

I hope this helps and I look forward to seeing the TV programme and the update to the MSE website.

sheramber

Already covered on website dated March 2021

https://www.moneysavingexpert.com/students/student-loan-overpayment-refund/

Martin Lewis sold this site many years ago and has  no connection with it now. For suggestions for his programme you will   his programme.

Ed-1

aplcomms said:

If their total taxable income is greater than the threshold then they need to subtract the threshold from the taxable pay and multiply by 0.09.  This figure is the Student Loan Repayment due.  If this figure is less than the total that has been deducted through PAYE then a repayment of the difference is due.

This bit's wrong. Student loan repayments are based on National Insurance rules where the pay period threshold, not the annual threshold, determines what repayments are due. Only when income is below, not above, the annual threshold can a refund be claimed.

The bit about interest is also a misconception. Interest isn't calculated until the student loan repayments for the month/year are known. At the point they are applied to the account, interest is (re)calculated. If repayments are not applied to the account until after the end of the tax year, interest is calculated assuming the repayments were received in equal monthly installments on the last day of each calendar month during the year.

It's not Martin Lewis who's responsible for drawing people's attention to the current terms and conditions of student loans. It's the borrower who has confirmed that they have read and understood them (and the fact they may be changed from time to time)!

aplcomms

I think what I said is correct. I was covering the case where student loan repayments were not made in all 12 monthly periods in the year.

If someone has 10 months with deductions the amount repayable will be calculated correctly.  The other 2 months will have no deductions because they are below the monthly threshold.

A refund will therefore be due.

Income tax calculations are cumulative so if pay is high one month then more tax is paid.  If the following month’s pay is low then tax is repaid.

Student loan repayments do not seem to be the same.  Maybe they should.

Ed-1

aplcomms said:

I think what I said is correct. I was covering the case where student loan repayments were not made in all 12 monthly periods in the year.

If someone has 10 months with deductions the amount repayable will be calculated correctly.  The other 2 months will have no deductions because they are below the monthly threshold.

A refund will therefore be due.

Income tax calculations are cumulative so if pay is high one month then more tax is paid.  If the following month’s pay is low then tax is repaid.

Student loan repayments do not seem to be the same.  Maybe they should.

As I said, income tax liability is based on annual earnings. National Insurance contributions (and therefore student loan contributions) are not. They are based on earnings above a pay period threshold in each job.

It is therefore possible to have more than one job both earning below the pay period thresholds and not be liable for any student loan repayments. The only exception is where a borrower has to file a self assessment with HMRC. This is the only time total income for the year is looked at.

It's all in the regs (as amended):
https://www.legislation.gov.uk/uksi/2009/470/contents/made

Part 4 covers repayment by employees. Part 3 covers repayment by self-employment.