New Scottish Student Loan type Plan 4 to be introduced from April 2021

17 June 2020

An email has been circulated by HMRC’s Software Developer Support Team (SDST) in relation to the creation of a new Scottish student loan Plan type.

This is due to the fact that, on 9 June 2018, an announcement was made by Scotland’s First Minister, which revealed that Scotland will raise its student loan earnings threshold to £25,000 from April 2021. This will be for new and existing borrowers, who will see the repayment period reduced from 35 to 30 years, to mirror the arrangements in place in England and Wales.

The increase has made it necessary for this new Scottish student loan Plan type to be created, and from 6 April 2021, borrowers will be repaying under a new Plan type 04, if they have drawn down a student loan from Scotland. This is applicable to all new and existing Scottish borrowers, and existing Scottish borrowers in repayment before 6 April 2021 under Plan type 01 will begin to pay under Plan type 04 from 6 April 2021. Where there is a requirement to move employees from Plan type 01 to Plan type 04, employers will be notified under the current SL1 notification process. This will be completed with sufficient time for amendments to be made in time for April 2021 payroll.

From 6 April 2021, any Plan type 04 Scottish borrower repayments will be calculated at 9% of earnings that exceed the £25,000 threshold. The new plan will continue to be calculated, deducted and paid to HMRC, following the current PAYE process. Deductions will be based on NICable pay and rounding rules will follow that of existing Student Loans.

The advice for software developers is that Plan 04 will be introduced as an undergraduate plan type and should be recorded in the same fields as Plan types 01 and 02 on the Full Payment Submission (FPS). Plan 04 deductions should appear as ‘student loan’ on employee wage slips.

It is possible that a borrower could have more than one plan type. Employers are only required to make Student Loan deductions for only one undergraduate plan type at a time, but postgraduate loans can be taken alongside a postgraduate loan, as per the current rules.

New Starter checklists and SL1 documents will be updated to include Plan 04 but there will be no amendments to P45s or P60s, where deductions for Plan types 01, 02 and 04 will be included within the undergraduate field.

CIPP comment

The CIPP’s Policy and Research team attend the Collection of Student Loans forum (CSL) – if you have any comments, views or opinions that you would like to share, or any feedback on any other process relating to the collection of student loans, then please contact us at [email protected].

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