Question 1

How do umbrella companies handle student loan deductions?

Accepted Answer

Umbrella companies deduct student loan repayments automatically through PAYE, just like regular employers. Once your gross pay (after the umbrella margin and employer costs are deducted from your assignment rate) exceeds the monthly threshold for your loan plan, they deduct 9% of the amount above the threshold. For example, with a £500/day assignment rate (£10,000 monthly), after umbrella margin, employer NI, and other costs, your gross pay might be £8,500. If you're on Plan 2, you'd pay 9% of (£8,500 - £2,372.50) = £551.48 in student loan deductions.

Question 2

Do I need to register my student loan with my umbrella company?

Accepted Answer

Yes, you should declare your student loan when you join an umbrella company, typically on your starter checklist or P45. You must specify which plan you're on (Plan 1, 2, 4, or 5, or Postgraduate). If you don't declare it, HMRC will eventually notify your umbrella company, and deductions will start with backdated corrections. Your umbrella receives tax code notices from HMRC that include student loan information, so even if you forget, the system will catch up with you.

Question 3

How does IR35 affect my student loan repayments?

Accepted Answer

If you're working inside IR35 through an umbrella company, your student loan deductions are handled automatically through PAYE like any employee. If you're outside IR35 running a limited company, you calculate student loan repayments through Self Assessment based on your total taxable income (salary plus dividends). Inside IR35 is actually simpler for student loans - the umbrella handles everything automatically. Outside IR35, you need to calculate 9% of your total income above the annual threshold and pay it by 31 January through your tax return.

Question 4

Where does student loan appear on my umbrella payslip?

Accepted Answer

Student loan deductions appear in the PAYE section of your umbrella payslip, after income tax and National Insurance but before your net pay. A typical umbrella payslip shows: Assignment Rate → minus umbrella costs (margin, employer NI, apprenticeship levy, pension) → Gross Pay → minus personal deductions (income tax, employee NI, student loan, pension) → Net Take-Home Pay. For a £3,000 gross pay on Plan 2, you might see: Tax £350, NI £290, Student Loan £153.45, leaving £2,206.55 net.

Question 5

Can I avoid student loan deductions by not telling my umbrella company?

Accepted Answer

No, you cannot avoid student loan deductions by not declaring them. HMRC maintains records of all student loan borrowers and sends notifications to employers and umbrella companies electronically. If you don't declare your loan, HMRC will issue an SL1 notice to your umbrella company within a few pay periods, and deductions will start automatically with potential backdated amounts owed. Deliberately failing to declare a student loan could be considered tax evasion. The umbrella company is legally required to deduct once notified by HMRC.

Aspect	Umbrella (Current)	Outside IR35 Ltd Co
Student Loan Deductions	£6,972/year Automatic PAYE	£6,972/year Via Self Assessment
Payment Timing	Weekly/Monthly	Annual (31 Jan)
Flexibility	Low	High
Administration	Simple	Complex

Umbrella/Inside-IR35 Student Loan Calculator

Contractor Student Loans

Student Loan Declaration

Quick Summary

Weekly Payslip Breakdown

Income

Employer Costs (Deducted from Assignment Rate)

Employee Deductions

Take-Home Analysis

Annual Projections (48 weeks)

Annual Figures

Self Assessment Equivalent

IR35 & Student Loan Treatment

Umbrella Company

Recommendations

Key Features

Comparison: Umbrella vs Outside IR35

Understanding Contractor Student Loans

Umbrella Company Treatment

IR35 Fee-Payer Issues

Key Planning Points

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