How maternity pay affects UK student loan deductions. Budget for SMP, understand PAYE calculations, and avoid overpayments during leave.
Taking maternity leave is financially complex even without student loans in the picture. Your income drops significantly, often to less than half your normal salary, yet your expenses typically increase with a new baby. Add student loan deductions into the mix, and the financial picture becomes even more challenging. Many new parents are shocked to discover that student loan deductions continue during maternity leave, sometimes taking substantial amounts from already-reduced statutory pay.
The confusion stems from how PAYE handles maternity pay. The system treats each pay period independently, applying the monthly student loan threshold regardless of whether you're earning your normal salary or receiving reduced statutory maternity pay. If your SMP payment exceeds the monthly threshold (even slightly), you'll have 9% deducted on the excess. Over several months, these deductions add up, often creating overpayments that you'll need to claim back after the tax year ends.
Understanding how maternity pay interacts with student loans helps you budget accurately for this period, identify when you're entitled to reduced or zero deductions, and claim refunds for any overpayments. It also helps you plan strategically around timing, additional leave options, and ways to structure your return to work to minimize financial disruption.
Statutory Maternity Pay (SMP) is what most employed mothers receive during maternity leave. To qualify, you must have worked for your employer continuously for at least 26 weeks by the end of the 15th week before your baby is due, and earned at least £123 per week on average.
SMP is paid for up to 39 weeks and consists of two rates:
90% of your average weekly earnings before tax. This is often close to or equal to your normal take-home pay.
The lower of £184.03 per week (2025/26 rate) or 90% of your average weekly earnings.
For most people, the 33 weeks are paid at the flat rate of £184.03 because their normal earnings exceed this amount. This translates to approximately £797 per month (£184.03 × 52 weeks ÷ 12 months).
Rachel pays student loans during the first six weeks when she's at 90% pay, but nothing during the remaining 33 weeks at the statutory rate. If she extends her leave beyond 39 weeks (unpaid), she continues to pay zero student loans during the unpaid period.
Student loan deductions during maternity leave depend entirely on whether your maternity pay in any given month exceeds the monthly threshold for your plan.
Monthly threshold £2,082.50
Monthly threshold £2,274.58
Monthly threshold £2,616.25
Monthly threshold £2,083.33
Monthly threshold £1,750
For most mothers at the statutory rate of £797 per month, deductions stop after the first six weeks because statutory pay falls well below all thresholds.
However, mothers earning higher salaries or those whose employers offer enhanced maternity pay above statutory minimums might continue having deductions throughout more of their leave:
Sarah pays substantial student loans during the enhanced pay period but nothing during the statutory rate period. Over her full maternity leave, she'll pay approximately £622 toward her student loan despite being off work and earning significantly less overall.
The core problem with maternity pay and student loans is that PAYE calculates monthly without considering your annual income trajectory. Each month stands alone. If you earn above the monthly threshold that month, deductions happen. The system doesn't recognize that you're on reduced income temporarily and will have low annual income overall.
This creates particular issues during the transition months:
You might receive part of your normal salary for the days you worked plus the start of your maternity pay. If the combined amount exceeds the monthly threshold, you'll have student loan deductions on the excess. This can be a substantial amount if you worked most of the month before leave started.
Similar issue in reverse. You might receive the tail end of maternity pay plus your returning salary for the days worked. Again, if the combined amount exceeds the monthly threshold, deductions apply.
Your payroll system might not immediately adjust your student loan deductions. If you were on a suspended or modified tax code during maternity leave, returning to work should trigger reinstatement of normal deductions. But payroll errors can mean either no deductions (creating underpayments you'll owe later) or excessive deductions (if cumulative codes try to "catch up" for missed periods).
Depending on how payroll calculates this, the combined payment might exceed the monthly threshold even though neither component alone would. If they process it as £2,200 in one calculation, Emma pays student loans on income that's individually below threshold but combined exceeds it.
Many employers offer enhanced maternity pay above statutory minimums. Common schemes include:
Full pay for 3-6 months, then statutory
Half pay for 3-6 months, then statutory
Based on length of service
Enhanced schemes create extended periods where student loan deductions continue because your maternity pay remains above the monthly threshold.
Someone earning £36,000 annually would receive:
This mother pays nearly £400 in student loans during maternity leave despite being on leave and caring for a newborn. While enhanced maternity pay is obviously better than statutory, the student loan deductions reduce the benefit somewhat.
If evaluating job offers or negotiating employment terms, understanding that enhanced maternity pay above your threshold triggers continued student loan deductions helps you calculate the true value. Six months at full pay sounds generous, but if you're paying 9% student loans on amounts above threshold, the net benefit is reduced.
Our Maternity/Paternity Leave Adjustment Calculator shows exactly how much you'll pay in student loans during different maternity pay scenarios.
Many mothers extend their leave beyond the 39 weeks of SMP by taking additional unpaid leave. Some employers allow up to 52 weeks total leave, with weeks 40-52 unpaid.
Unpaid leave means zero income, which means zero student loan deductions. Your payslip shows nothing for student loans during these months because there's nothing to deduct from.
If you're choosing between:
The student loan impact is neutral for those additional weeks. You're not paying loans during week 40-52 because you have no income. You're also not paying loans during weeks 7-39 if you're on statutory rate below the threshold.
The actual student loan cost of maternity leave primarily falls in the first six weeks at 90% pay (if your earnings are high enough that 90% exceeds the monthly threshold) or during any enhanced pay period your employer offers.
Here's where many mothers discover they've overpaid. Annual reconciliation compares what you actually earned for the full tax year against what you should have paid in student loans based on that annual income.
Plan 2 threshold is £27,295. Lisa's total income is £24,296, which is below the threshold. She should have paid zero student loans for the year. But she paid £142.03 through PAYE. Lisa is owed a £142.03 refund.
Many mothers in similar situations never claim this refund because they don't realize they overpaid. PAYE deducted correctly based on monthly calculations at the time, but the annual position shows overpayment.
These refunds can be substantial for mothers who worked only part of the year before maternity leave. Someone who worked five months then took maternity leave for seven months might be owed £200-£400 depending on their salary and circumstances.
Mothers who don't qualify for SMP (typically self-employed, recently changed jobs, or earning below the qualifying threshold) might receive Maternity Allowance instead. Maternity Allowance is paid by the government, not employers, for up to 39 weeks.
The rate is the lower of £184.03 per week or 90% of your average earnings. For most recipients, it's the flat £184.03 (£797 monthly), the same as the statutory rate of SMP.
From a student loan perspective, Maternity Allowance below threshold means zero deductions. HMRC doesn't automatically deduct from Maternity Allowance payments. You receive the full amount, and if your annual income including Maternity Allowance stays below the threshold, you owe nothing in student loans for that year.
If you have other income during the year (you worked before the leave, or you're self-employed with business income continuing), that income might push you above the threshold. But the Maternity Allowance itself doesn't have deductions taken at source.
Accurate budgeting requires knowing exactly when student loan deductions will and won't happen:
Use our Monthly Repayment Calculator to calculate exact deductions for each phase based on your specific salary and maternity pay arrangement.
When you time your maternity leave relative to the tax year can affect student loan implications:
You'll have worked only a few months before leave starts. Your annual income for the tax year will likely be low (part-year salary plus maternity pay). Higher chance you'll have overpaid through PAYE and be owed a refund at year-end.
You'll have worked approximately half the year. Depending on your salary, you might be above or below the annual threshold. Careful calculation needed to determine if you'll owe more or be owed a refund.
You'll have worked most of the year. You're likely above the annual threshold and probably won't have overpaid. In fact, if you return to work in the next tax year, you might have "lost" months of earnings that would have pushed you further above threshold in the first year but now spread across two tax years.
None of this should dictate when you actually take maternity leave (that's driven by your baby's arrival date, which you don't control precisely). But understanding the dynamics helps you anticipate whether you'll need to claim a refund, or whether you might actually owe additional student loan payments at year-end.
Many mothers return to work on reduced hours initially, building back up to full time over several months. This phased return affects student loan calculations.
If 50% of your salary falls below the monthly threshold, you'll have zero student loan deductions during this phase. Once you increase hours and pass the threshold, deductions restart.
If 80% of your salary still exceeds the monthly threshold, deductions restart immediately but at lower amounts than when you were full-time.
This gives you several months of zero student loan payments while you're rebuilding your work routine and managing childcare. It's a financial silver lining to the reduced income of part-time work. For most people on typical graduate salaries, returning at anything less than 90% hours means falling below the monthly threshold and having zero deductions during that period.
Maternity leave is financially challenging without student loans adding complexity. But with awareness of how the system works, you can budget accurately and ensure you're not paying more than you should.
Calculate your expected deductions before leave starts
Track what actually happens during leave
Check for overpayments when you receive your P60
Claim refunds if you're owed them
Maternity leave already reduces your income substantially. Don't let avoidable student loan overpayments reduce it further. The system isn't designed to handle maternity leave optimally, but understanding how it works means you can protect yourself from unnecessary costs and claim back money that's rightfully yours.
UK Education Policy Specialist
With over 15 years of experience in UK education policy and student finance, Dr. Sharma founded Student Loan Calculator UK to help students navigate the complex world of student loans.