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  • Writer's pictureBrian Pusser

New Student Loan Procedure

Updated: 5 days ago

Student loans
Student Loan Procedure

The PAYE system has resulted in thousands of taxpayers overrepaying their student loans. HMRC says its new procedure will help prevent this.

Student loans. According to official statistics, 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-repayment through PAYE occurring, or at least keep them from getting out of hand. Following consultations, the SLC will notify HMRC when a student’s loan has been fully repaid. HMRC will then inform you to stop making the deductions.

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.

Submit a claim for a refund with SLC to ensure you get your money back as soon as possible.

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



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