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Accounting Payroll Payroll Advice

Payroll Deductions in the UK

11 Jan 2024

We all love getting paid, don’t we? But unfortunately, because of payroll deductions in the UK, we don’t take home every penny we earn.

Payroll deductions in the United Kingdom refer to the money subtracted from an employee’s gross salary or wages. These are taken out by the employer before the employee receives their net pay. The deductions all serve different purposes, including contributions towards taxes, social security, pension schemes, and other benefits. The deductions are typically outlined in the employment contract or determined by statutory regulations. Fortunately for you, we’ve compiled a list of some common payroll deductions below to offer some insight into where your money is going:

Common Payroll Deductions in the UK

Income Tax

The big one that most people will already know about is income tax. This is the main source of government revenue and is deducted from your earnings based on your individual tax code and income thresholds.


National Insurance Contributions (NICs):

National Insurance Contributions offer a form of social insurance for people in the UK, helping fund things like hospitals, doctors and medical facilities. So as much as no one likes a deduction from their pay, you can kind of see the reasoning behind this one.

National Insurance has two elements to it:

Employee’s NICs: these are contributions toward the National Insurance system made by the individual based on your earnings. And…

Employer’s NICs: These are contributions made by your employer on top of your salary.


Pension Contributions:

If your employed in the UK, by law your employer must enrol you in a pension scheme, unless you earn less than:

  • £520 a month
  • £120 a week
  • £480 over 4 weeks

Pension Contributions can generally be separated into two camps:

Workplace Pension Scheme: these are contributions made to an employer’s pension scheme that are tied into their current role. Each organisation will likely use a different pension scheme and choosing which pension scheme suits your business is dependent on several factors.

Personal Pension Contributions: there are also voluntary contributions to a personal pension scheme that can be set up separately by employees. These can be taken between jobs and are determined by the amount the employee decides to contribute.


Student Loan Repayments:

Yes, that looming figure that you (almost) forgot about.

If you decide to go to University, you’ll start to see those pesky payments coming out once you start earning a certain amount. Depending on what Plan your on, you will have to start paying at different points and the amount you pay will also differ. Check out a full breakdown of what each Plan pays here.

If applicable, based on your income and student loan type.


Union Dues

If you are a member of a trade union, you’ll have monthly dues deducted. These will often cover union activities such as collective bargaining and representation. Depending on the union, these fees will either be charged as a percentage of your salary or as a fixed fee.


Company Benefits

You’ll see deductions to cover non-cash benefits provided by employers, such as health insurance, company cars, or any other perks.

How this is calculated will vary based on the value of the benefit and the specific terms of the benefit scheme provided by employers.


Attachment of Earnings Order

In cases where a court orders deductions for things like child maintenance or debt repayment, there’ll often be a monthly deduction. The amount deducted each month will be dependent on the individual case and the agreed fee.


Season Ticket Loan Repayments

If your employer provides a season ticket loan, repayments may be deducted from your salary. Season ticket loans are essentially a way for employers to cover the upfront cost of season travel tickets. The costs are then paid back over a chosen period as a deduction from the salary.


Childcare Vouchers

Childcare vouchers in the UK are an employee benefit aimed at helping working parents manage the costs of registered childcare and are provided through a salary sacrifice scheme. If you’re signed up, yep, you guessed it, you will see this deducted each month.


Cycle-to-Work Scheme Repayments

If your employer provides a cycle-to-work scheme, repayments for the cost of the bicycle may be deducted from your monthly pay. Health is wealth and all that!


So there you go. A whistle-stop tour of some of the payroll deductions in the UK you can expect to see each month.  If you have any questions about key payroll dates in the UK, luckily enough we’ve compiled a handy list for you. Your payroll team will always be able to help if you ever need any questions answered or if something crops up on your paycheck that you didn’t expect.

As always, feel free to get in touch with our team who will be able to help you with any queries.

Get a full breakdown of everything involved in paying staff and getting paid as an employee in our Guide to Payroll.