CSLM20040 - SL repayments: underpayments and overpayments: PAYE borrower claims a refund of deductions

The borrower may be due a refund in the following instances:

  • they've paid more than the total amount they owe
  • their annual income was below the threshold
  • they started making repayments before they needed to
  • they've repaid more than they need to because their employer had them on the wrong repayment plan

The borrower can visit the gov.uk website to find out if they are due a refund. 

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 and Postgraduate Loan Deduction Tables which are non - cumulative.
  • 2)  The Student Loans Company will handle any refund of repayment. For more information,  the borrower should visit gov.uk website. 
  • 3)  The weekly limit, below which no loan repayments need be made, is not an exact divisible of the annual threshold
    • 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 and Postgraduate 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 and Postgraduate Loan Deduction Tables
  • 2)  The borrower's income for the year exceeds £17,495