HMRC tax error sees thousands overcharged on student loans

An error in payroll software used by HMRC has caused thousands of individuals to overpay on their student loans.

The error saw £1.6 million taken from 16,000 workers between 2016 and 2023, totalling around £104 each. Those affected earn over £100,000 or operate as sole traders and claim benefits-in-kind.

According to HMRC, its payroll software should’ve automatically ignored benefits on which workers don’t pay national insurance, but the software included them in student loan calculations by mistake.

HMRC stated that it is writing to graduates to inform them that they will be repaid via their student loan accounts and that a temporary solution has been put into place for the remainder of this tax year.

Around £20 billion is loaned per year to 1.5 million students in England. At the end of March, the value of outstanding loans was £206 billion.

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