Student Loan Overpayment from Backpay

joannegrewar

My employer has paid me a back payment of maternity leave that was due in the 22/23 tax year and I have had student loan deductions taken off from the backpayment. My total maternity pay and backpayment is below the repayment threshold for the year 22/23 but SLC have said this doesn't qualify for a refund as it was paid to me in this tax year. I have had £800 taken that I would have otherwise had if I had been paid in the correct tax year. Can I challenge this?

silvercar

I’ll ask the forum team to move this to the student board.

My take on it, is that it counts for the tax year in which it was paid ie you can’t move it to a different tax year. So if it was paid to you in 2023/24 tax year then slc are entitled to include it in a calculation of what repayments you should make in 2023/24. If it should have been paid in 2022/23 and your income was low enough in 2022/23 that you still would have been below the threshold then you are correct that you wouldn’t have deductions made from it. 

On the face of it slc is right and hmrc is right. The one that got it wrong is your employer. You could decide to try and negotiate with your employer for some help with the repayment you have had to make as a consequence, though I doubt many employers would agree to compensate you for tax you have had to pay as a result. Short term cash flow you suffer, if your loan will eventually be repaid in full then long term you will have saved on interest charged, but I appreciate that may not be your top concern right now.

given that repayments are 9% of income above the threshold, losing £800 implies you received an extra £8,889 back payment. That’s a big mistake for your employer to make and you not to query earlier.