If you’re a contractor with a student loan, your umbrella company deducts repayments through PAYE. You don’t need to set anything up. HMRC tells your umbrella which plan you’re on. Deductions start once your earnings pass the threshold.
Does an umbrella company deduct student loan repayments?
Yes. Your umbrella company deducts student loan repayments through PAYE, just like any employer. HMRC tells the umbrella which repayment plan applies. Deductions are taken every pay period once your earnings go over the threshold. The umbrella does not decide whether to take them. It has to.
You’ll see the deduction on your payslip. If you’re not sure where to look, check payslip breakdown for umbrella contractors.
What are the 2026-27 repayment thresholds?
The 2026-27 thresholds depend on your plan. Plans 1, 2, 4 and 5 use a 9% rate on earnings above the threshold. Postgraduate loans use a 6% rate. Deductions are worked out for each pay period, not on your full annual salary at once.
Here are the current thresholds from 6 April 2026:
| Plan | Annual threshold | Monthly threshold | Rate |
|---|---|---|---|
| Plan 1 | £26,900 | £2,241 | 9% |
| Plan 2 | £29,376 | £2,448 | 9% |
| Plan 4 (Scotland) | £33,795 | £2,816 | 9% |
| Plan 5 | £25,000 | £2,083 | 9% |
| Postgraduate (Plan 3) | £21,000 | £1,750 | 6% |
If you’re on more than one plan, deductions run at the same time. Each one is worked out separately against its own threshold.
Which plan am I on?
Your plan depends on when and where you studied. Plan 1 covers English and Welsh students who started before 2012. Plan 2 covers students who started from 2012 onwards. Plan 4 applies to Scottish borrowers. Plan 5 is for students who started from August 2023. Postgraduate loans are Plan 3.
Check your Student Finance account or the Student Loans Company to confirm your plan. You can also check your P60 or previous payslips. If your umbrella is using the wrong plan, contact HMRC directly.
How does the deduction appear on my payslip?
The deduction appears as a separate line on your payslip, labelled by plan type. It comes out of your gross pay after tax and National Insurance. It does not reduce your taxable income.
Use the umbrella take home pay calculator to see how deductions affect your net pay. Tax, NIC and student loan deductions show separately.
Read the pay and tax guide for a full pay breakdown.
What if I overpay?
If your umbrella deducts too much, HMRC refunds the overpayment. That happens through self-assessment or directly from HMRC. You do not need to chase the umbrella. HMRC keeps the repayment record and issues refunds when your loan is cleared or a deduction error happens.
The most common reason is clearing your loan mid tax year. PAYE keeps deducting until HMRC sends a Stop Notice to your umbrella.
If you think you’ve overpaid, contact HMRC’s student loan helpline. Don’t expect your umbrella to sort it out. The umbrella acts only on HMRC’s instructions.
Can my umbrella stop the deductions?
No. Your umbrella must follow HMRC’s instructions on student loan deductions. It cannot pause, reduce, or stop them just because you ask. Only HMRC can change the instruction.
If your loan is paid off, HMRC sends a Stop Notice to your umbrella. Deductions stop from the date on that notice. Contact HMRC if you’ve cleared your balance and no Stop Notice has been issued.
Does DASA handle student loan deductions correctly?
Yes. DASA Umbrella processes student loan deductions through its PAYE payroll in line with HMRC instructions. DASA holds accreditation from FCSA, Professional Passport and SafeRec. All three independently check its payroll processes. Deductions are applied each pay period and shown clearly on your payslip.
If you have questions about your deductions or your umbrella company, contact the DASA team directly.
FAQs
Does my umbrella company automatically deduct student loan repayments?
Yes. Your umbrella handles student loan repayments through PAYE using HMRC’s instructions, so you do not need to set them up yourself.
What is the Plan 2 student loan threshold for 2026-27?
For 2026-27, the Plan 2 annual threshold is £29,376, or £2,448 a month. You repay 9% of anything you earn above that.
What is the Plan 1 student loan threshold for 2026-27?
For 2026-27, the Plan 1 annual threshold is £26,900, or £2,241 a month.
What happens if my umbrella overpays my student loan?
HMRC refunds any overpayment directly. If you think you’ve been charged too much, contact HMRC. Your umbrella follows HMRC’s instructions and cannot issue the refund itself.
How do I know which student loan plan I’m on?
Check your Student Finance account or contact the Student Loans Company. The plan you’re on depends on when and where you studied.
