Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Collection of Student Loans Manual

From
HM Revenue & Customs
Updated
, see all updates

SL repayments: underpayments and overpayments: PAYE borrower claims a refund of deductions

The employer may have correctly deducted Student Loan repayments, but the borrower considers that a refund of repayments is due because of

  • The level of his or her income during the year

And

  • The way in which the earnings were paid which may have caused apparent inconsistencies in the deductions made

This is the responsibility of the Student Loans Company but general information is given below.

The question of whether a refund is due to the borrower depends on whether the income for the year is more than the Student Loan annual threshold. This can obviously not be determined until after the end of the tax year.

The following examples demonstrate the position and assume that the annual threshold is £17,495 and the rate is 9 per cent.

Example 1 - Borrower’s income is less than the annual threshold

The borrower has an annual salary of £13,320 paid weekly. No deductions will be made by the employer on the salary alone because the wages do not exceed the threshold of £336 per week.

However, in addition, a bonus of £900 is paid in week 32. For that week only the employer will have correctly made Student Loan deductions. The deduction made in accordance with the Student Loan Deduction Tables will be £74.

Because the borrower’s earnings for the year did not exceed the annual threshold of £17,495 a refund of the deductions made, £74, will be due.

Notes:

1. The employer will not make a refund because deductions were made correctly according to the Student Loan Deduction Tables which are non - cumulative.
   
2. The borrower should contact the Student Loans Company after the end of the tax year with evidence of income and deductions. The Student Loans Company will handle any refund of repayment.
3. The weekly limit, below which no loan repayments need be made, is not an exact divisible of £17,495. It is possible that an employer or borrower may query this.
  The apparent discrepancy is because Student Loan deductions are always rounded down. A borrower could therefore earn slightly more than the strict weekly threshold before making payments because the resulting liability is less than £1.
  The Student Loan Deduction Tables have been devised to take the rounding - down factor into account.

Example 2 - Borrower’s income is more than the annual threshold, (£17,495)

The borrower has an annual salary of £16,000 paid weekly. No deductions will be made by the employer on the salary alone because the wages do not exceed the threshold of £336 per week.

However, in addition, a bonus of £2000 is paid in week 32. For that week only the employer will have correctly made Student Loan deductions. The deduction made will be £176 (307.69 + 2000 - 336 x 9 per cent = £177).

It may appear that a refund of repayments is due to the borrower because, by reference to the annual threshold the position appears to be

Income (£18,000) - Annual Threshold (£17,495) X 9 per cent = £45. Refund due £132 (£177 - £45)

However, no refund of deductions is due to the borrower because

1. The employer has deducted Student Loan repayments in accordance with the Student Loan Deduction Tables
   
2. The borrower’s income for the year exceeds £17,495