Not long into the 2017/18 tax year and already we know student loan thresholds for the tax year 2018/19.
We already know the Plan 2 Student Loans threshold will be £21,000 until at least April 2021 (when the threshold will be reviewed)
The Plan 1 threshold will be £18,330
The Student Loans Company (SLC) Website confirms this figure, though we await any public announcement from HMRC. However, it is actually not too difficult to corroborate this by looking at the legislation itself.
There are two pieces of legislation where the announcements are corroborated:
- The Education (Student Loans) (Repayment) Regulations 2009 say that the threshold will be amended in Great Britain each year
- The Education (Student Loans) (Repayment) Regulations (Northern Ireland) 2009 say the same thing
Both pieces of legislation say that the repayment threshold for the forthcoming tax year is:
- The repayment threshold for the previous repayment inflated by
- ‘The percentage increase between the retail prices all items index published by the Office for National Statistics for the two Marches immediately before the commencement of the previous [repayment threshold year]’
This is rounded up to the nearest £5.
Essentially, and simply, the threshold for 2018/19 is the 2017/18 threshold multiplied by the Retail Prices Index at March 2016! This was 3.1%.
This is the simple part. The Student Loan threshold for 2018/19 is calculated as follows:
- The 2017/18 threshold £17,775 + 3.1% = £551.03
- Rounded up to the nearest £5 which is £18,330
There is a new Student Loan coming to payroll departments for deduction from April 2019. This is for the repayment of a Loan given for a full-time or part-time postgraduate Master’s course that is taught or research-based. Of course, things are not the same UK-wide and they are only applicable to students studying in England and Wales. However, they were not effective at the same time:
- In England, the Education (Postgraduate Master’s Degree Loans) Regulations 2016 provide for students who are ordinarily resident in England to apply for a Loan from 01 August 2016 up to £10,000 (increasing to £10,280 from 01 August 2017)
- In Wales, the Education (Postgraduate Master’s Degree Loans) (Wales) Regulations 2017 provide for students who are ordinarily resident in Wales to apply for a Loan from 01 August 2017 up to £10,280
The Loan is not repayable until the April after the student has left or finished their course. Repayments will be made concurrent with undergraduate (Plan 1 and 2) Loan repayments and will be income contingent, based on a threshold of £21,000. However, the repayment percentage will be 6%. So, assuming that an employee has an undergraduate Plan 1 Loan and a postgraduate Loan, the payroll system will have to calculate:
- 9% of earnings above the Plan 1 threshold (£18,330 in 2018/19) and
- 6% of earnings above the Postgraduate Loan threshold (£21,000)
At the earliest, the Loans will be collected through the payroll from April 2019. The fact that the Loans were not available in both countries at the same time means that, probably, English Loans will be repayable through the payroll before Welsh Loans.
Note that the English and Welsh Regulations have been amalgamated in the Repayment of Student Loans and Postgraduate Master’s Degree Loans (Amendment) Regulations 2017. These amend the Education (Student Loans) (Repayment) Regulations 2009 which govern the repayment of Student Loans in Great Britain.
For completeness and to complete the devolution picture:
In Scotland, Postgraduate Loans are on top of Plan 1 Loan and are not a separate Plan type. A Scottish Postgraduate Loan is available up to a maximum of £10,000 and is actually comprised part tuition-fee loan (up to £5,500) and part living-cost loan (up to £4,500).
Like Scotland, Postgraduate Loans are on top of Plan 1 Loan and are not a separate Plan type. The Postgraduate Tuition Fee Loan is available from 01 August 2017 to a maximum value of £5,500 for tuition fees only.
Look out for a new Plan type soon. This will be for students who were ordinarily resident in England or Wales.
The ‘Collection of Student Loans Consultation Group’ minutes from 07 March 2017 indicates that HMRC are ‘looking at having IT in place by April 2018 ready for the first cohort coming through in October 2018 for starts in April 2019’. I assume that this is one of the reasons that the Full Payment Submission from April 2018 will contain the Plan type so that it can populate HMRC’s updated systems.
With regards to amendments to software for the new Postgraduate Loans, the minutes also state ‘if changes have to be in by April 2018 then Software Developers need to know about this by June 2017’. Software developers have not been advised and the assumption from this is that 2018/19 products will not have to take into account the new Loan type.
The 2018/19 Threshold
This has already been publicised but we could have worked it out anyway. We know that the Plan 1 threshold will be £18,330 in 2018/19. What we really need is the thresholds by pay period. Whilst we can speculate on these, it is good to wait for HMRC’s publication to software developers that detail this information.
Remember, payroll software does not calculate Loan deductions using rounded thresholds. Therefore,