There is no need to disclose your actual location to us. All that matters is that you are not in the UK and you are not covered by that particular law. I wish you had done more than just corrected grammar issues in the work you paid for though. Actually rewording a majority of the content would have negated the paid work. Allowing you to reference it as a "model paper" if you were asked about it.
what if they actually do something about it?
Since you cannot disprove that you submitted the paper for a grade, then you may be brought up on charges of academic misconduct / dishonesty resulting in either suspension or expulsion. It will depend on the way the academic council would view the seriousness of your actions. As a first timer, maybe a suspension will be applied. Nobody can be sure.
I haven't and I just don't want to reply to their message
Good move. Keep ignoring the writer. Block his email or send it directly to spam. Interaction of any sort will embolden him. He is just testing the waters for now.
is there a smart way I could handle the situation if my school ever asks me about it?
Coming clean and admitting guilt is always beat. That is if you are aiming for leniency since you do not have a valid defense. Trying to claim innocence about not knowing that hiring academic writers and submitting the work for a grade was an academic offense will not fly. IMO, the model paper defence would have been the best defense. When cornered, be honest. It should help the outcome of the investigation.
Do not worry though. I sincerely believe it will not come to that. Just continue to ignore the writer. He will eventually quit contacting you.