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Plan 1 - Repaying through PAYE

 

When does repayment begin?

You will normally start making student loan repayments through the PAYE scheme from the April following the date you graduate from or leave your course.



How are repayments made?

Your employer(s) will be advised by HM Revenue & Customs (HMRC) to calculate and deduct student loan repayments from your pay. These deductions will be shown on your pay slip so you can see how much is being paid back each pay period.


At the end of the tax year your employer(s) will advise HMRC of the total deductions they have made. HMRC will then pass details of your total repayments to us and we will apply your repayments to your account.


We only receive details of your repayments after the end of the tax year so we advise that you keep your pay slips and P60, which is given to you by your employer(s) at the end of each tax year, as a record of the repayments you have made.



What happens if I change employer?

If you change employer, your new employer may ask which repayment plan type you have, Plan 1 or Plan 2, to set the correct threshold and to work out any repayments deductions based on your income. Your plan type can be found on any recent correspondence. You can also work it out yourself by answering these questions



Claiming back student loan repayments if you earned less than £17,495 in the tax year

It is possible that you had a student loan deduction in a pay period where you earned over the monthly or weekly threshold, but over the whole year your income did not exceed £17,495. This might happen if you receive a bonus payment or work overtime.


In this situation you will be able to apply to us for a refund of the repayments you have made in that year. However, we will not make a refund unless you ask for one.


You may decide you do not want a refund, in which case you will pay off your loan more quickly and pay less interest on the outstanding balance.



Overpaying your student Loan

You will be entitled to a refund if you overpay your loan. We will only be able to authorise a refund either:

  • Once HMRC confirms your total earnings and student loan repayments at the end of the tax year; or
  • You send us your pay slips showing your student loan deductions for the current tax year.



What if I have repaid too much and have a credit balance?

If you have a credit balance we’ll write to you and ask you to contact us.

The following table explains interest on credit balances and refund options based on your plan type(s).

Plan type Credit interest
Plan 1 only You’ll accrue credit interest on your refund amount for up to a maximum of 60 days
Plan 2 only
Plan 1 and Plan 2 – both plan types have a credit balance refund available
Plan 1 and Plan 2 – one plan type in credit, one with outstanding balance
  • You can request the refund or use it to reduce the balance on your other outstanding student loan(s).
  • We’ll automatically allocate the credit balance to your outstanding plan type balance if we haven’t heard from you within 60 days of the date on your letter.
  • You’ll only gain interest on the refund amount for up to a maximum of 60 days


Student Loan deductions and Occupational Pensions

If you are in receipt of an occupational pension that is not subject to Class 1 National Insurance Contribution (NIC) deductions, your pension payer should not take any student loan deductions.

Student loan deductions should only be made from income that is subject to Class 1 National Insurance Contributions at the point of payment. If you are unsure what kind of pension you are being paid you should ask your pension payer for information. The pension payer will however still have to deduct income tax in the normal way.

The only time an occupational pension could attract student loan amounts would be if you are required to complete an annual Self-Assessment (SA) Tax Return for HM Revenue & Customs and the total of all your unearned income exceeds £2,000.


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