The Independent Review of Financial Support for Students in Scotland Consultation ran from 30 June to 31 August 2017. It reported on 20 November 2017 and contained two recommendations in terms of Student Loans for Scottish borrowers:
- A shortened write-off period for unrepaid Student Loans from 35 to 30 years and
- An increase to the repayment threshold (Plan 1) from 2021
With regards to the repayment period, Shirley-Anne Somerville MSP, then-Minister for Further and Higher Education, confirmed that the repayment terms in Scotland would reduce to 30 years by the end of 2018.
Note that this applies to post-September 1998 Loans only. Pre September 1998 ‘mortgage’ type Loans have been sold to 3 different private companies and ex-students with this type of Loan should approach the relevant holder of the outstanding debt.
The Repayment Period
The Education (Student Loans) (Miscellaneous Amendments) (Scotland) Regulations 2018 made good on the recommendation and commitment from the Minister. From 04 December 2018 Student Loans for Scottish borrowers are written off if unpaid as follows:
- If taken out between September 1998 and the end of August 2006, the Loan is wiped clear at the age of 65 or 30 years following eligibility to start repaying, whichever is the soonest
- If taken out September 2006, the Loan is wiped clear 30 years following the date on which the ex-student became eligible to repay it
Whilst ceasing Student Loan deductions is totally out of the hands of employers and upon instructions from HMRC, it is good to see that the maximum repayment periods for Scottish borrowers are no longer the highest in the United Kingdom.
The Repayment Threshold
Of more interest, perhaps, to employers and software developers is the increase to the repayment threshold for Scottish borrowers. The above report said that this should increase to £22,000 as did the SNP’s Programme for Government 2016/17 published in September 2017 which committed to raise the Plan 1 threshold to £22,000 by the end of the Parliamentary term in 2021.
On 09 June 2018, First Minister Nicola Sturgeon announced that this would increase to £25,000 instead, effective April 2021. This was confirmed by Shirley-Anne Somerville in the 06 July 2018 announcement.
Neil Nicholas, HMRC Chair of the Collection of Student Loans Consultation Group first confirmed that a ‘Project’ had been set-up in September 2019.
Then, on 16 June 2020, HMRC’s Software Developer Support Team (SDST) communicated with developers, relaying information from HMRC’s Customer Strategy and Tax Design specialists. This contains more information about the Plan 1 threshold increase to Scottish borrowers, now named Plan 4.
In the first instance, it is worthwhile saying that there is no differential between Undergraduate (UGL) and Postgraduate loans (PGL) in Scotland (or Northern Ireland). Whist they do exist, all Student Loans are deducted as if they were an undergraduate loan, Plan 1. It is only Postgraduate Loans in England and Wales that are deducted as separate products.
- Plan 4 applies to all new and existing Scottish borrowers from April 2021
- The Starter Checklist (and Expat version) and the SL1 will be revised to accommodate the new Plan 4
- The P45 and the P60 will not change
- Employers will be notified via an SL1 to change an employee from UGL Plan 1 to UGL Plan 4
- The repayment percentage is the same as other Undergraduate Loan deductions (9%), hoverer, the threshold will be £25,000
- Like all Loan types, the deduction will be based on the rules in place (i.e. on NI’able pay with the usual rounding rules)
- There is no requirement to separate Plan 4 from any other UGL Loan on the payslip
- There is no requirement to separate Plan 4 from any other UGL on the Real Time Information (RTI) submissions. The data fields remain unchanged from those used for Plans 1 and 2 at the moment (data items 27, 41C, 67 and 192)
- As this will be operated as a UGL, the same principle applies – only one UGL can be operated at any one time. However, as Plan 1 is abolished for Scottish borrowers and Plan 2 only applies to English or Welsh borrowers, I would have thought it unlikely that someone could be a Scottish borrower and a borrower from another nation (Plans 1 and 2 in England and Wales and Plan 1in Northern Ireland)
- As now, a Plan 4 UGL can operate concurrently with a PGL (remembering that these are only available to English and Welsh borrowers)
- For software developers, the expected timelines for updated technical specifications including schemas is in summer 2020; test services for RTI and DPS in October 2020; first new-format SL1s will be issued from end February/beginning of March 2021; FPS submissions using new-format accepted in Live service from 6 March 2021
I am not aware that the necessary legislation is in the pipeline in Holyrood at the moment. This will give the backing to the new Plan and insert the threshold into the overriding Student Loan repayment legislation.
Things are progressing with this and it is good to see HMRC being proactive with communication.