If you’re working through an umbrella company and still have a student loan to repay, you’re probably wondering when and how the deductions kick in. It’s not always clear at first glance, especially when your payslip already includes tax, National Insurance, and maybe even pension. Let’s break it down so you know exactly where your money goes.
Do umbrella companies deduct student loans?
Yes. If your earnings go over your student loan threshold, the umbrella company will deduct repayments automatically through PAYE.
This happens the same way as it would if you were working as a regular employee. Once HMRC knows you have a student loan, it informs your umbrella company, and they handle the deductions without you needing to ask. If they miss it, HMRC steps in later with adjustments.
How your umbrella company knows you owe a student loan
When you join an umbrella company, they ask for your P45 or a starter checklist. One of the questions asks if you’ve taken out a student loan. If you tick yes, that’s their first clue. If you forget or lie, HMRC still flags it once you’ve been paid a few times. Either way, the deductions catch up with you.
Your umbrella payroll provider receives tax code updates and loan repayment instructions straight from HMRC. So even if you switch umbrella companies, your repayment obligations follow you. Once you’re in the system, the system doesn’t forget.
Know your plan and threshold
Student loan deductions depend on which repayment plan you’re on. Not everyone repays the same way, and the amount you pay depends on how much you earn, not how much you owe.
Here’s what the thresholds and rates look like for 2024/25:
| Loan Plan | Threshold (Annual) | Rate Over Threshold |
|---|---|---|
| Plan 1 | £24,990 | 9% |
| Plan 2 | £27,295 | 9% |
| Plan 4 | £31,395 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgrad Loan (PGL) | £21,000 | 6% |
You only pay on the income above the threshold. So if your income is £30,000 and you’re on Plan 2, you only repay 9% of the £2,705 over the limit.
Where does the student loan sit in your umbrella payslip?
The deduction shows up under the PAYE section of your payslip. It comes after income tax and National Insurance but before your net pay. If it’s not there and you know it should be, it might just be a delay, or the umbrella hasn’t received HMRC’s instruction yet.
Let’s say you’re earning £3,000 a month on Plan 2. Here’s what a rough breakdown might look like:
| Item | Amount |
|---|---|
| Gross Pay (after umbrella margin) | £3,000 |
| Income Tax | £350 |
| National Insurance | £290 |
| Student Loan (Plan 2) | £153.45 |
| Net Pay | £2,206.55 |
That £153.45 comes from 9% of £1,705, which is the portion of your monthly earnings above the Plan 2 threshold (£27,295 yearly ÷ 12 = £2,274.58).
How to check if you’re being charged correctly
You don’t need to do the maths every month, but checking your payslip now and then helps you catch mistakes early. First, find your gross pay. Then look at your student loan plan and figure out your monthly threshold. Subtract that from your gross and apply the 9% or 6% rate depending on your plan.
If the number looks too high or too low, ask your umbrella company to explain it. If you recently started the job and the loan isn’t showing up yet, it might just be lagging behind. If months pass and nothing appears, you might have ticked the wrong box on your starter checklist. In that case, HMRC might apply a backdated deduction, so it’s better to fix it early.
Can your plan change mid-year?
No. Your repayment plan doesn’t change during the tax year, and you can’t switch plans. HMRC assigns your plan based on when you took out the loan and where you lived. Your umbrella company just follows the instructions they’re given. If you have both an undergrad and a postgraduate loan, you’ll see two deductions.
If your income goes up or down, your repayments change with it. You’ll only pay when your earnings are above the line. If you have a short month, take unpaid leave, or switch contracts, your deductions might drop to zero.
Final thoughts
Student loan repayments through an umbrella company are simple once you know how they fit into the payslip. You don’t control when they start or stop—HMRC does that—but you do control your documents. If your starter checklist or P45 is wrong, your deductions will be too. It pays to double-check.
When you look at your take-home pay, it helps to understand why it’s less than expected. Student loans, while often small compared to tax and NI, still make a dent. If you’re unsure what your real pay looks like after everything is deducted, our umbrella contractor pay calculator gives a clear payslip breakdown using your actual day rate. It even includes your Key Information Document, so you see the full picture before payday.
You don’t have to be a maths whiz to check your pay. You just need the right numbers in front of you. So keep your records tidy, your payslips in hand, and your eyes on the threshold. Because when your money’s on the line, every little deduction counts.
