Thousands of students are overpaying loans due error by HMRC – how to check if you are owed a refund
THOUSANDS of students have been overpaying loans due to a system error.
Around 16,000 people who have taken out student loans have been overcharged by hundreds of pounds.
The HMRC error was spotted by the tax office in 2023, but this was after thousands students were already affected.
If you paid taxes through self-assessment or receive any type of employee benefits, you may have been at risk of overpaying.
RSM accountancy firm spokesperson Paul Slokan told The Mirror: “Whilst the amount can ultimately be recovered, it is a cashflow issue that many graduates could do without.”
He explained that as employers move to payrolling benefits, the self-assessment system for those with loans faces an issue with identifying benefits as a separate sum.
The system error developed as HMRC’s self-assessment can’t tell the difference between the payrolled benefits and the rest of the PAYE income.
These are then included in the student loan and repayments.
If loan-holders were to be issued a benefit on the company worth £5,000 while on a £50k salary a deduction, which should be based on their salary, would also include the benefit.
They would therefore be taxed as if they had £55k rather than 50k – which would be an overpayment.
He added: “As a result, a graduate earning £50,000 could be overcharged about £600 in one year.”
HMRC says the median overpayment is around £44.
Slokan said: “As more employers have moved to payrolling benefits, it has become apparent that there is an issue in the self-assessment system for those with student and postgraduate loans.
“Loan deductions are not due on payrolled benefits in kind that are not subject to Class 1 National Insurance.”
Class 1 National Insurance affects peole who are under State Pension age and earning more than £242 a week from one job.
There is guidance for those impacted by the error on the HMRC website but unfortunately many people are unaware of the issue altogether.
If you’ve overpaid, the Student Loans Company will try to contact you to get a refund or refund you automatically.
If you think you may have paid too much and haven’t yet been contacted, you can check your loan balance on the gov.uk website by logging into your online account.
The Association of Taxation Technicians spokesperson Helen Thornley said: “It’s important that anyone affected is aware of the workaround.
“Otherwise, they will end up overpaying their student loan and have to wait for HMRC to contact them to arrange a refund.
“Unless HMRC is able to change their systems, this will become more of a problem in future years as payrolling of benefits becomes mandatory from April 2026.”
HMRC is set to find a permanent solution within 12 months and is aiming fix the problem by April 2025.
How to get a refund
If you think you may have overpaid your student loans there are a few things you can do
If you haven’t been contacted about a refund, you may still have overpaid
Firstly check your loan balance on the gov.uk website
To sign in you will need:
- Customer reference number or email address
- Password
- Secret answer, for example your mother’s maiden name
Here you can check how much you owe and how much interest you are paying
If it doesn’t look correct you can flag this to HMRC by using their online portal to find the right contact details
Make sure to have your student loan details on hand
They should be able to confirm whether you have overpaid or not and issue you a refund