If you’re a contractor with a student loan, your reliable umbrella company deducts repayments through PAYE. You do not need to do anything. HMRC tells your umbrella which plan you are on. Deductions start automatically when your earnings cross 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 your umbrella which plan you are on. Deductions are taken each pay period once your earnings pass the threshold. Your umbrella has to follow that instruction.
You will see the deduction clearly on your payslip. Check reading your umbrella payslip if you are not sure where to find it.
What are the 2026-27 repayment thresholds?
The 2026-27 thresholds depend on your plan type. Plans 1, 2, 4, and 5 use a 9% rate on earnings above the threshold. Postgraduate loans use a 6% rate. Your umbrella works out the deduction for each pay period, not your full yearly salary in one go.
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 are on more than one plan, the deductions run at the same time. Each plan is worked out against its own threshold.
Which plan am I on?
Your plan type depends on when and where you studied. Plan 1 is for English and Welsh students who started before 2012. Plan 2 is for students who started in 2012 or later. Plan 4 is for Scottish borrowers. Plan 5 is for students who started in August 2023 or later. 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 earlier 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 is taken after tax and National Insurance. It does not reduce your taxable income.
Use the umbrella take home pay calculator to see how the deductions affect your net pay. Tax, NIC, and student loan all appear on separate lines.
Read the umbrella PAYE tax explained for a full breakdown of PAYE tax.
What if I overpay?
If your umbrella deducts too much, HMRC refunds the overpayment. That usually 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 balance reaches zero or when a deduction error happens.
The most common reason is that you clear the loan partway through the tax year. PAYE keeps deducting until HMRC sends a Stop Notice to your umbrella.
If you think you have overpaid, contact HMRC’s student loan helpline. Do not expect your umbrella to fix it. Your umbrella only follows 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 for you. Only HMRC can change the instruction.
If your loan is paid off, HMRC sends a Stop Notice to your umbrella. Deductions stop on the date shown on that notice. Contact HMRC if you have 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’s instructions. DASA also holds dual accreditation from FCSA and Professional Passport, and both bodies review its payroll processes. The deduction appears clearly on your payslip each pay period.
If you have questions about your deductions or your umbrella company, contact the DASA team directly.
Frequently asked questions
Does my umbrella company automatically deduct student loan repayments?
Yes. Your umbrella deducts student loan repayments through PAYE based on HMRC’s instructions. You do not need to arrange this yourself.
What is the Plan 2 student loan threshold for 2026-27?
The Plan 2 annual threshold is £29,376 (£2,448 per month) for 2026-27. You repay 9% of earnings above this amount.
What is the Plan 1 student loan threshold for 2026-27?
The Plan 1 annual threshold is £26,900 (£2,241 per month) for 2026-27.
What happens if my umbrella overpays my student loan?
HMRC refunds overpayments directly. Contact HMRC if you think you have been overcharged. Your umbrella acts on HMRC’s instructions and cannot issue refunds itself.
How do I know which student loan plan I am on?
Log in to your Student Finance account or contact the Student Loans Company. Your plan type depends on when and where you studied.
