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Confusion over Student Loan thresholds 2018-19

I must admit to being more than a little confused about the Department for Education’s announcement last weekend about “new education and skills measures”.

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Update 19 October 2017:

On 18 October 2017, Kirsty Williams AM, Welsh Education Secretary, confirmed that the Welsh Government is following England and raising the Plan 2 threshold from £21,000 to £25,000 from 2018/19. This is good news for software developers and HMRC who do not have to go through an exercise to separate English borrowers from Welsh borrowers.

Importantly, what this does highlight is the fact that Wales might not have decided to follow England and alignment might not have happened. I have pointed out to HMRC that their announcement to software developers on 6 October 2017 did not consider the devolved nature of education and skills.

Again, I have to use my favourite line at the moment – "just because it happen in England does not mean it happens UK-wide".

 

The headline announcements for UK reward professionals are the freezing of tuition fees for 2018-19 academic year and raising the repayment threshold from £21,000 to £25,000. This is for Plan 2 Student Loans that apply if the student’s home was in England or Wales at the time they took the loan, on or after 1 September 2012.

 

The announcement, though very short on detail, appears to be that the threshold will increase to £25,000 from April 2018 and will apply to all ex-students who are repaying a Plan 2 Loan, not just those that start repaying from April 2018. The threshold then looks likely to increase in line with average earnings annually.

 

I am sure this will all be clarified in the legislation that will have to follow. Currently, the Education (Student Loans) (Repayment) (Amendment) (No. 2) Regulations 2012 state that the threshold is £21,000 and makes no provision for this to change. The 2012 regulation amended the governing 2009 regulations.

 

However:

 

  • The Department for Education (DfE) who made the announcement is responsible for higher and further education policy in England only.

 

  • Education and skills is a devolved policy, so shouldn’t there be a similar announcement from the Department for Education and Skills (DfES) in Wales?

 

Which makes me wonder if this announcement about the increased Plan 2 threshold from 2018 just applies to students whose home address was in England at the time they took their loan. Which then makes me wonder whether HMRC is able to separate the English and Welsh for notification to employers.

 

Importantly, if different thresholds are to apply and HMRC can make the distinction between English and Welsh, do software developers have enough time to make this change for the start of the 2018-19 tax year? They will have been relying on the fact that legislation for 2018-19 thresholds states £21,000 (Plan 2) and £18,330 (Plan 1 UK-wide Loans).

 

Some clarification, legislation and guidance cannot come soon enough. Or maybe I am thinking about this too deeply!

 

 

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