Types of Tax Deductions to Expect on a Payslip
1) Income Tax
Gross earnings are taxed through a Pay As You Earn (PAYE) system. This system is used to by employers to deduct income tax and National Insurance contributions form your salary before they pay you. Taxable incomes include, salary, bonuses, annual leave, commissions, workplace benefits, etc.
As of the 2023-24 tax year, the basic tax rate is 20% on income between £12,571 and £50,270. The table above shows a clear picture of the rest of the tax bands applicable in calculating your income tax.
2) National Insurance Contributions
National Insurance Contribution (NIC) for employees also varies depending on your income.
For NIC, the calculations are based on individual thresholds that the employee’s income falls under. The NIC payable by employees is called Class 1 national insurance. The rates and calculations structure is as summarised in the table below;
Your Earnings Per Month | Rates | Calculation Notes | |
Lower earnings limit | £0 to £1,048 | 0% | |
Primary threshold | (£1,048 to £4,189 | 8% | The rate is for income between primary threshold and upper earnings limit |
Upper earnings limit | £4,189 | 2% | The rate is for income above upper earnings limit |
Other Statutory Deductions
Pensions Contributions
All employers provide a workplace pension scheme in the UK. As an qualifying employee, you will be enrolled into the pension scheme under the ‘Automatic Enrolment’ rules of the government. If you meet all the following criteria, you will be automatically enrolled into a pension scheme when they start employment in the UK;
- you’re classed as a ‘worker’
- you’re aged between 22 and State Pension age
- you earn at least £10,000 per year
- you usually (‘ordinarily’) work in the UK
Student Loan Repayments
If an employee has benefitted from Student Loan facilities whilst undertaking their tertiary education, HMRC will require the employer to start deducting loan repayments during payroll. HMRC will write to the employee and their employer if they assess the employee’s earnings as high enough to start making student loan repayments. The letter will specify the required repayment calculations and dates for starting the deductions.