In a recently released news story published on the Gov.uk website updates to student loans interest rates and payment thresholds have been announced for the tax year 2021/2022.
The updates were confirmed by the Department for Education (DfE) on the 11th August of 2020, and more are expected to follow.
What is changing?
Thresholds for Plan 1 and Plan 2 have dropped, and it has been confirmed that the Postgraduate annual threshold will remain the same.
The thresholds will be:
Plan 1 Detail
As stated in the Education Regulations 2009 which dictates how student loan repayments are made and calculated, changes to repayment thresholds for the coming tax year are calculated 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 then rounded up to the nearest £5, and which the Retail Prices Index being 2.6% for March 2020 the increment for 2021/2022 is £504.14 above the £19,390 which comes out at £19,894.14. Rounded up to the nearest £5 this delivers the figure of £19,895 that has been published.
Plan 2 Detail
Plan 2 only applies to borrowers in England and Wales, and according to the Education Regulations 2009 the coming tax year’s threshold is calculated with “an amount equal to A + (A x B) and rounded up to the nearest £5.”
In this equation A is the repayment threshold for the previous repayment threshold year, and B is the relevant percentage difference in average earnings according to the Office for National Statistics.
The percentage difference in average earnings between January to March 2019 and January to March 2020 was 2.7%, which means that the repayment threshold for 2021/2022 can be calculated as £26,575 plus £717.525 coming out at £27,292.525. Rounded up to the nearest £5 this gives us the figure of £27,295.
Postgraduate Threshold Detail
The legislation does not include provision for increments of the Postgraduate Loan Threshold and therefore this remains at the figure of £21,000.
New – Scottish Student Loan (Plan 4)
In addition to the above updates, from 2021 the Scottish Student Loan, otherwise known as Plan 4, will be introduced.
What we know about the plan so far:
- From April 2021 the plan threshold will increase to £25,000
- It applies to all new and existing borrowers in Scotland (issued by the Student Awards Agency Scotland) from April 2021
- The Starter Checklist and SL1 will be revised in accordance with this
- P45 and P60’s will not change
- Employers will be notified of the change from Plan 1 to Plan 4 via an SL1
- The repayment percentage does not change and stays at 9%
- Deductions are based on the existing rules in place that apply to all loan types
- Plan 4 does not need to be separated from other undergraduate Student Loans on the payslip or Real Time Information (RTI) FPS submissions
- Only one undergraduate loan may be operated at any one time including Plan 4
- Plan 4 UGL operates concurrently with a PGL
- FPS submissions using the new format will be accepted in live service from 6th March 2021
- New format SL1s will be issued from the end of February/beginning of March 2021
- Software developers – expected timelines for the updated technical specifications including new schemas is currently summer 2020 with test services for RTI and DPS expected in October 2020