This would be a school decision, as you could enter the target for a Year 3 student as a 4:1 or 4:2 for example, or alternatively you could set the target as a 3X1; this is the same as a 4:1 in the background but doesn't take the students into the next year group for assessment.
If you want to use the X1 option please go to Admin > Config > Steps Assessment Config
and change 'See all Steps in markbook' to 'No'. Please be advised X1 targets can only be entered via Admin > Students > Student Targets and not via the Targets option in the markbook.