HMRC have announced a new initiative to reduce student loan over repayments for those ex students who repay their loan through PAYE deductions.
Ex students have been in the position whereby it has been difficult for them to avoid over repaying their student loan as the loan term came to an end. This is due to the time delay between their employer making deductions from their salary each month and submitting an annual return showing the individual repayment amounts for each employee.
Ex students will now be able to opt out of PAYE repayments in the last 23 months of repayment and transfer to a Direct Debit arrangement. This should mean that the ex student will not over repay their loan.
This new initiative has been introduced by the Student Loans Company (SLC). The SLC will try to contact borrowers shortly before the last 23 months to offer and arrange this option. However if a borrower is aware that they are reaching this point they can contact the SLC direct and arrange to repay the balance of their loan in this way.
Employers will not have to change their procedures as their authority to stop making deductions comes from HMRC on a form SL2 Stop Notice and this authority will be issued in the normal way.