The Threshold Where the Employee has BOTH Plan 2 and Plan 4 Student Loans

Last week, I wrote about the Education (Student Loans) (Repayment) (Amendment) (No. 4) Regulations 2022 which has renamed the Student Loan Plan types as follows:

• Plan 1 – applies UK-wide
• Plan 2 – applies for borrowers from England (for borrowers post-2012 up to 31 August 2023)
• Plan 2 – applies for borrowers from Wales (for borrowers post-2012 and post-31 August 2023)
• Plan 3 – applies for borrowers from England and Wales (previously known as Postgraduate Loans)
• Plan 4 – applies for borrowers from Scotland
• Plan 5 – applies for borrowers from England from the start of academic year 2023/24

All of these are referred to as Income Contingent Repayment (ICR) Student Loans meaning that the repayment liability exists depending on the level of income. ?

Having missed the impact of this legislation on employers, in my mind there are 2 priorities:

HMRC’s own internal manual does not reflect these changes, indeed any changes since it was last updated on 21 April 2021.? Indeed, it implies that The Education (Student Loans) (Repayment) Regulations 2000 are the ones that govern the collection of ICR Student Loans when, in fact, these were revoked and consolidated into The Education (Student Loans) (Repayment) Regulations 2009 .

The all-important 2009 Regulations are referred to as secondary legislation, i.e., secondary to the primary legislation that allowed them to be created in the first place.? With respect of ICR Student Loans, there are various pieces of primary legislation, for example, the Teaching and Higher Education Act 1998 and the Higher Education Act 2004.?

Primary legislation is updated on www.legislation.gov.uk , however, secondary legislation is not.? This means that it is extraordinarily complicated to keep updated with the latest changes.? The best way to keep track of changes that have not been made are to refer to the ‘Changes to Legislation’ part.? In terms of the original 2009 Regs, there are over 700 changes that need to be factored in as there have been many ‘Amendment Regulations’ over the last 14 years, i.e. Regulations which amend the original.

As ICR Student Loans are so important to the UK Government and HMRC, you would have thought that they would want to ensure their guidance and the legislation was up-to-date.? Anyone reading the 2009 Regs would still believe that the repayment threshold for Plan 1 was ￡15,000 – and there is no mention of any other Plans!

There’s another consideration of the No. 4 Regulations I missed – and even these have been corrected by No. 5 Regulations to correct ‘drafting errors’.? The Education (Student Loans) (Repayment) (Amendment) (No. 4) Regulations 2022 contain information about which threshold should be applied where the employee / ex-student indicates that they have BOTH and Plan 2 (England and Wales) and Plan 4 (Scotland) ICR Student Loan.

In this regard, it is necessary to look at the ICR thresholds that apply in tax year 2023/24, comparing to 2022/23:

As you can see, for the first time, in tax year 2023/24, the threshold for Plan 4 exceeds the threshold for Plan 2 for the first time.? Therefore, the question is ‘what threshold needs to apply if an employee / ex-student indicates they have BOTH a Plan 2 AND PLAN 4 ICR Loan on the Starter Checklist', for example:

Would this happen in reality?? A borrower who has a Plan 2 (England and Wales) and Plan 4 (Scotland).? I would have thought it unlikely, however, legislation and software needs to cope with the fact that this COULD happen.

Always remembering we have Plan 5 on the horizon, Regulation 41 of the 2022 Amendment Regulations says:

Plan 3 would have the lowest repayment threshold; however, this ex-Postgraduate Loan has a lower repayment percentage.? The default now (and always was) to apply the undergraduate ICR Student Loan with the lowest repayment threshold (1, 2, 4 or 5) and highest repayment percentage.?

Even though, in my opinion, it seems an unlikely situation to be faced, payroll software must be able to deal with this.? The specifications , issued on 16 January 2023, the same day the legislation took effect, does contain this instruction to developers.

I suppose we must wait for these specifications to be updated in respect of the Plan name changes and the addition of Plan 5, effective 06 April 2023.??