Why your student loan deduction looks wrong (bonuses, two jobs and refunds)
Student loan deductions are simple in theory and surprising in practice. Most “wrong” deductions turn out to be the system working as designed, but sometimes you really have overpaid, and you can claim it back.
Deductions follow each pay period
Your employer applies your plan’s threshold to each pay period on its own: a weekly threshold if you’re paid weekly, a monthly one if you’re paid monthly. Anything above it in that period is charged at your plan’s rate. “Income” here means what you earn before tax and other deductions, including bonuses and overtime.
That has an effect people don’t expect: a month with a bonus, overtime or commission can produce a much bigger deduction, because your pay for that period looks high even if your yearly total is modest. GOV.UK’s guidance makes the same point. See how much will I repay? for the formula.
The monthly deduction is also rounded down to whole pounds on GOV.UK’s examples, so your payslip may differ by a pound from a calculation on a yearly figure.
Common causes of a surprise
- A bonus month. Extra pay counts as income for that period.
- The wrong plan type. If payroll holds the wrong plan, the threshold is wrong. See is my employer using the right student loan plan?
- Two loans. With more than one plan you make one combined deduction, worked out on the lowest threshold. See what if you have more than one student loan plan?
- A loan that’s just been cleared. HMRC tells your employer to stop deductions once you’ve repaid in full, but that can take around four weeks.
- Thresholds changing in April. They change on 6 April each year.
Two jobs work differently from what you might expect
If you’re employed with more than one employer, repayments come only from jobs where you’re paid over the threshold for your plan, not from your combined income. Two jobs that each pay under the threshold can mean no repayments at all, even if together they’re above it. If you also file a Self Assessment return, HMRC works from your income for the whole year, and any repayments already made through payroll are taken into account.
Can you get it back?
Yes, in several situations, including when your income for the whole tax year was below your plan’s yearly threshold despite a high month. There are rules: you can only ask about a tax year that has finished, and the Student Loans Company won’t refund anything until it has confirmed your income with HMRC. See how to claim a student loan refund for the full list and how to ask.
Things to check
- Your payslip: does the deduction look right for your pay period?
- Your P60: it shows total student loan deductions for the tax year. Keep it, and your payslips.
- Your annual statement from the Student Loans Company: does what you repaid match?
Is it worth overpaying to avoid this?
No. Deductions follow your income, so paying extra voluntarily doesn’t change what is taken from a bonus. It only reduces the balance. See how to make a student loan overpayment.
Source: GOV.UK, Repaying your student loan. This is general information, not tax advice; see the disclaimer.