It’s not often you have cause to mention the words ‘student loan debts’ and ‘good news’ in the same breath, but in this case it might just be appropriate. HMRC have announced a new initiative to cut out student loan over-repayments, which frequently occur if you repay your loan off via PAYE deductions (pretty much everybody, then).
These over-payments usually affect employees in the final 12 months of their repayment schedule, because often it’s not until the end of the year that their employer lets HMRC know how much they’ve repaid (in other words, even if you were all square with the Student Loans Company by June you may keep making repayments until around the following April).
HMRC’s solution is to allow employees to opt out of PAYE repayments during the last 23 months of their loan repayment period and transfer to a direct debit arrangement, to cut out the possibility of paying more than they should.
The new initiative has been introduced by the Student Loans Company (SLC) who say they will attempt contact borrowers shortly before they enter into the final 23 months of their repayments and invite them to switch over. If you’ve ever telephoned the Student Loans Company though, you’ll know that they are a busy lot, so if you’re reaching the light at the end of your repayments tunnel we’d advise you take the bull by the horns and contact them before they contact you.
Contractors running their own payroll should continue to make student loan deduction until they receive an SL2 Stop notice from HMRC, then they’ll be good to switch to direct debit.