We are 5 months into tax year 2020/21, yet already we know some thresholds that will apply for the next one:
The Plan 1 annual threshold will be £19,895 (from £19,390)
The Plan 2 annual threshold will be £27,295 (from £26,575)
The Postgraduate annual threshold will remain at £21,000
A news story on 11 August 2020 confirms these figures. At the same time,
The Education (Student Loans) (Repayment) Regulations 2009 govern how the repayments and thresholds are calculated in the United Kingdom.
Plan 1
The legislation says 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 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 2021/22 is the 2020/21 threshold incremented by the Retail Prices Index at March 2020. This was 2.6%.
Therefore, the Student Loan threshold for 2021/22 is calculated as follows:
- The 2020/21 threshold £19,390 + 2.6% = £504.14
- Rounded up to the nearest £5 which is £19,895.00
Plan 2
These apply to English and Welsh borrowers.
The 2009 legislation says that the repayment threshold for the following tax year is ‘an amount equal to A + (A x B) and rounded up to the nearest £5 where:
- A is the repayment threshold for the previous repayment threshold year
- B is the relevant percentage difference in average earnings’. The Education (Student Loans) (Repayment) (Amendment) Regulations 2018 describes this as: ‘The percentage difference between the average earnings in periods 1 and 2, as published on the website of the Office for National Statistics on the last day of June that follows period 2, where:
- Period 1 is the three-month period consisting of January to March in the calendar year prior to period 2;
- Period 2 is the three-month period consisting of January to March ending a calendar year and six days before the beginning of the repayment threshold year’
So, to work out how the Plan 2 threshold is calculated for 2021/22 requires us to look at the difference in average earnings between January to March 2019 and January to March 2020. The Office for National Statistics’ publication showed that average earnings between the two periods had increased by 2.7%.
Therefore, the Student Loan threshold for 2021/22 is calculated as follows:
- The 2020/21 threshold £26,575 + 2.7% = £717.525
- Rounded up to the nearest £5 which is £27,295.00
Postgraduate Loans
There is no legislative provision for this to be incremented at all and it remains at £21,000.
SSL (Plan 4)
New from 2021/21 will be the introduction of the Scottish Student Loan (SSL, or Plan 4 as it is referred to on the draft Starter Checklist for 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, Minister for Further and Higher Education in a written statement on 06 July 2018.
The Details
- Plan 4 applies to all new and existing Scottish borrowers from April 2021. A Scottish borrower is one with a Student Loan issued by the Student Awards Agency Scotland
- The Starter Checklist (and Expat version) and the SL1 will be revised to accommodate Plan 4
- The P45 and the P60 will not change
- Employers will be notified via an SL1 to change an employee from Plan 1 to Plan 4 (neither Plan 2 nor Postgraduate Loans (PGL) apply to Scottish borrowers)
- The repayment percentage remains at 9%, only the threshold changes
- 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 undergraduate Student Loan on the payslip
- There is no requirement to separate Plan 4 from any other Student Loan on the Real Time Information (RTI) FPS submissions
- As this will be operated as an undergraduate Loan, the same principle applies – only one can be operated at any one time
- Plan 4 UGL 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
- The 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