![[UK] Get Ready for Plan 4 Student Loans](http://globalpayrollassociation.com/cdn/shop/articles/bigstock-Real-estate-agent-showing-hous-24611642_a29f929e-4f88-49ae-814e-d7f0d03a623b_1200x.jpg?v=1593522816)
In 2018 there were two announcements about student loans for Scottish borrowers. A Scottish borrower is anyone that draws a student loan from Scotland:
- The repayment period would be reduced to 30 years from 35 (in line with England & Wales). This happened via legislation in December 2018
- A new higher threshold would be set for Scottish borrowers of £25,000 from April 2021, as opposed to the lower threshold that applies at the moment. There is only one plan type in Scotland which is plan1
On the 16th of June 2020, HMRC advised software developers to prepare for the new student loan type for Scottish borrowers which is to be called plan 4. The communication was as follows:
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 has created the need to introduce a new Scottish 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 from this date.
From 6th April 2021 any Plan type 04 Scottish borrower repayments must be calculated at 9% of earnings above the £25,000 threshold.
Student loan Plan type 04 will be calculated, deducted and paid to HMRC using the current PAYE process. Plan 04 is to be introduced as an undergraduate plan type and as such should be 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.
The deductions will be based on NI’able 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 current SL1 notification process, in time for April 2021 payroll activities.
The New Starter Checklist (including the ExPat Version), and the SL1 documents will be 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.
Global Payroll Association Comment
We knew that this was coming, as we are part of HMRC’s consultation group on student loans. This will impact software developers who will have to work this change into their development schedules. Updated technical specifications including “schemas” are planned for the summer of 2020, test services in October 2020.
In 2018 there were two announcements about student loans for Scottish borrowers. A Scottish borrower is anyone that draws a student loan from Scotland:
- The repayment period would be reduced to 30 years from 35 (in line with England & Wales). This happened via legislation in December 2018
- A new higher threshold would be set for Scottish borrowers of £25,000 from April 2021, as opposed to the lower threshold that applies at the moment. There is only one plan type in Scotland which is plan1
On the 16th of June 2020, HMRC advised software developers to prepare for the new student loan type for Scottish borrowers which is to be called plan 4. The communication was as follows:
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 has created the need to introduce a new Scottish 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 from this date.
From 6th April 2021 any Plan type 04 Scottish borrower repayments must be calculated at 9% of earnings above the £25,000 threshold.
Student loan Plan type 04 will be calculated, deducted and paid to HMRC using the current PAYE process. Plan 04 is to be introduced as an undergraduate plan type and as such should be 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.
The deductions will be based on NI’able 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 current SL1 notification process, in time for April 2021 payroll activities.
The New Starter Checklist (including the ExPat Version), and the SL1 documents will be 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.
Global Payroll Association Comment
We knew that this was coming, as we are part of HMRC’s consultation group on student loans. This will impact software developers who will have to work this change into their development schedules. Updated technical specifications including “schemas” are planned for the summer of 2020, test services in October 2020.