6th April 2021 sees the commencement of Student Loan deductions type Plan 4.
On 9th June 2018 Scotland’s First Minister announced that Scotland will raise their student loan earnings threshold to £25,000 from April 2021. This will be for new and existing borrowers and the repayment period reduced to 30 years from 35 (in line with England & Wales).
This increase in threshold results in the introduction of a new student loan Plan type. Beginning on 6th April 2021, anyone who has drawn down a student loan from Scotland will repay under a new Plan type ‘04’
This will be applied to all new and existing Scottish borrowers from April 2021. Existing Scottish borrowers in repayment before 6th April 2021 and paying under Plan type 01 will pay under Plan Type 04. Repayments will be calculated at 9% of earnings above the £25,000 threshold and paid to HMRC using the current PAYE process.
Student loan Plan type 04 is recorded in the same fields as Plan types 01 and 02 (data items 27, 41C, 67 and 192) on the Full Payment Submission (FPS). Plan 04 deductions can be shown as ‘student loan’ on the employee’s wage slip.
Student Loan deductions are based on NICable pay and rounding rules will follow that of existing Student Loans.
There may be situations where a borrower has more than one plan type. Employers are required to make SL deductions for only one undergraduate plan type at a time, postgraduate loans can be collected concurrently, in line with the current process.
Employers will be notified of any plan type moves from 01 to 04, using the SL1 notification process, in time for April 2021 payroll activities.
The New Starter Checklist (including the ExPat Version), and the SL1 documents are being revised to include Plan 04. There will be no changes to the P45, or to the P60 where deductions for plan types 01, 02 and 04 will be included in the undergraduate field.