Umbrella Workers and Student Loan Repayments Explained
When you work through an umbrella company and have a student loan, the umbrella handles your repayments automatically via PAYE — but it helps to know how the system works, what thresholds apply in 2025/26, and how to check your payslip.
How repayment works under an umbrella company
As an umbrella worker, your umbrella employer is treated much like any other employer. The umbrella company receives payment from your agency or client, deducts its margin and employment costs, and treats the remainder as your gross pay for tax and National Insurance purposes.
Because student loan repayments are collected through PAYE, your umbrella company will deduct the amount due automatically.
In practice, once your gross earnings exceed the relevant student loan threshold, the umbrella will deduct the correct percentage above that amount. This deduction appears on your payslip alongside tax, National Insurance, pension (if applicable), and other standard deductions.
Repayment thresholds and percentages for 2025/26
For the 2025/26 tax year, the repayment thresholds and rates are:
-
Plan 1: threshold £26,065; repay 9% of earnings above that amount
-
Plan 2: threshold £28,470; repay 9% above that amount
-
Plan 4: threshold £32,745; repay 9% above that amount
-
Postgraduate loans: threshold £21,000; repay 6% of earnings above that
Plan 5 loans (for courses starting on or after August 2023) aren’t due to begin deductions until April 2026.
If you have more than one type of loan — for example, a Plan 2 and a Postgraduate Loan — your umbrella company will handle both automatically through PAYE.
What this means for your net pay
Because student loan deductions come after gross pay is calculated, they reduce your take-home pay just like tax and National Insurance. However, if your income stays below the threshold, you won’t make any repayments.
If you’re new to umbrella working, it’s worth understanding how your overall pay is structured. Our guide on umbrella payslips explains the different deductions that affect your final pay packet.
Bear in mind that in 2025/26 there are changes to employer National Insurance that could impact umbrella company margins. If your assignment rate hasn’t increased to match, your gross pay allocation might feel tighter than before.
Checking your payslip: what to look for
On your payslip, you should see a clear entry labelled “Student Loan” or similar, showing the deduction amount. That figure should come from your gross taxable pay, not from the portion the umbrella keeps as its margin.
Make sure your umbrella provider has registered the correct loan plan (Plan 1, 2, or 4, or Postgraduate) when setting up your payroll. If deductions are missing or incorrect, contact your provider immediately.
To stay protected, always use a compliant umbrella company that’s accredited by a trusted body such as the FCSA or Professional Passport. You can find trusted options in our list of Top 10 Umbrella Companies.
Common points of confusion
If you forget to declare your student loan, deductions might not start until HMRC adjusts your tax code — potentially resulting in back payments later.
Whether your contract is inside or outside IR35 doesn’t change how student loan repayments work: as long as your income is processed through PAYE, the same thresholds and rates apply.
A compliant umbrella can’t skip student loan deductions if you owe them. If they do, that’s a red flag — and could mean the provider isn’t operating legally or transparently.
Summary
For umbrella workers in 2025/26, student loan repayments are handled automatically through PAYE. The key is to know which plan you’re on, check your payslip regularly, and make sure you’re working with a legitimate provider.
If your income is above the threshold, deductions will appear automatically; if not, no repayment is made. Keep an eye on your payslip and your provider’s transparency to stay on top of your finances.
