Payslip Deductions Explained: What Comes Off UK Pay
The gap between gross and net pay surprises most new employees. A worker on the standard 1257L tax code keeps the first £12,570 of annual income free of income tax [4], then loses 20% of the next band to income tax and a further 8% of earnings above £242 a week to National Insurance [5]. Pension contributions, student loans and occasionally court orders take more.
Every one of those deductions must be itemised. Since 6 April 2019, all workers, not only employees, have had the legal right to a written payslip showing each variable deduction and its purpose [1]. An employer that deducts money without legal authority faces an unlawful deduction claim at an employment tribunal [9].
This explainer sets out the deductions that appear on a UK payslip, in the order they are calculated: the statutory deductions everyone recognises, the court-ordered attachments fewer people encounter, and the voluntary and contractual deductions that depend on what the worker has agreed.
Key takeaways
- A payslip must show gross pay, net pay and every variable deduction with its purpose, under section 8 of the Employment Rights Act 1996.
- The main statutory deductions are PAYE income tax, employee National Insurance at 8% between £12,570 and £50,270, pension contributions and student loan repayments at 9%.
- Court orders such as Direct Earnings Attachments can take up to 20% of net earnings at the standard rate, but must always leave the employee with at least 60% of net pay.
- Any other deduction requires a contractual clause or prior written consent, otherwise it is unlawful and claimable at a tribunal within 3 months.
- Retail workers have extra protection: deductions for till or stock shortages are capped at 10% of gross pay per pay period.
What the law requires a payslip to show
Section 8 of the Employment Rights Act 1996 entitles every worker to an itemised pay statement at or before payday [3]. The statement must show gross pay, net pay, the amount and purpose of each variable deduction, and the number of hours worked where pay varies by time [1].
Fixed deductions, such as a regular union subscription, can be shown as a single aggregate figure, but only if the employer has issued a separate standing statement of fixed deductions, which must be reissued every 12 months [3]. Everything else on the deductions side falls into one of three legal families: statutory, court-ordered, or agreed.
The statutory deductions
Statutory deductions are taken because legislation says so. No consent is needed and the employer has no discretion. They are calculated by HMRC-recognised payroll software in a strict sequence, since several of them depend on the others.
PAYE income tax
Income tax is collected through Pay As You Earn, using the tax code HMRC issues for each employment [2]. For England and Northern Ireland, the bands above the £12,570 Personal Allowance are 20% (basic), 40% (higher, above £50,270) and 45% (additional, above £125,140) [4]. Scotland applies its own six-band system, signalled by an S prefix on the tax code, and Wales uses a C prefix [4]. The mechanics of how codes drive the calculation are covered in the Moonworkers article on employer National Insurance and PAYE.
National Insurance
Employees pay Class 1 National Insurance on earnings between the Primary Threshold (£242 a week, £12,570 a year) and the Upper Earnings Limit (£967 a week, £50,270 a year) at 8%, then 2% above that [5]. The employer pays a separate 15% above the Secondary Threshold of £5,000 a year, but that contribution never appears as a deduction on the employee's payslip; it sits alongside it as an employer cost [5].
Student and postgraduate loans
Student loan repayments are deducted automatically once earnings cross the threshold for the borrower's plan [7]. The five active plans carry different thresholds, summarised below for the 2026-27 tax year.
| Plan | Annual threshold | Rate above threshold |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 4 | £33,795 | 9% |
| Plan 5 | £25,000 | 9% |
| Postgraduate Loan | £21,000 | 6% |
A borrower with both an undergraduate plan and a postgraduate loan repays on both at the same time, at a combined 15% on income above the respective thresholds [15]. A full walk-through of the calculation sits in the Moonworkers guide to student loan deductions.
Workplace pension contributions
Under auto-enrolment, eligible jobholders aged 22 and over earning above £10,000 a year must be enrolled into a workplace pension [6]. The statutory minimum is 8% of qualifying earnings (the band between £6,240 and £50,270), of which at least 3% comes from the employer, leaving the employee paying up to 5% including tax relief [6]. How the deduction appears on the payslip depends on the scheme type: under relief at source the employee line shows 4% taken from net pay, while under a net pay arrangement the full 5% is deducted before tax [11].
Court-ordered deductions
A minority of payslips carry deductions the employer is legally compelled to operate on behalf of a third party: attachment of earnings orders from courts, council tax attachment orders, child maintenance deductions from earnings orders, and Direct Earnings Attachments raised by the DWP to recover benefit overpayments [14].
Each order type carries its own rules, but two protections recur. First, deduction rates are banded against net earnings; a DEA takes up to 20% of net pay at the standard rate and up to 40% at the higher rate [8]. Second, a protected earnings floor applies: a DEA must never leave the employee with less than 60% of their net earnings [8].
For payroll teams, attachment orders are operationally fiddly: they apply in a fixed priority sequence, the employer may charge the employee a small administration fee for processing some order types, and the calculation runs on net earnings after tax, National Insurance and pension contributions [8]. Accountants running multiple client schemes typically rely on a payroll bureau platform to sequence these automatically.
Voluntary and contractual deductions
Beyond statute and court orders, an employer may only deduct money where a clause in the contract authorises it, or the worker has agreed in writing before the deduction is made [9]. Common examples include union subscriptions, season ticket loan repayments, cycle-to-work instalments, charitable payroll giving and repayment of salary advances.
Salary sacrifice arrangements look similar on the surface but work differently. The employee gives up contractual salary in exchange for a benefit, so gross pay itself falls, and tax and National Insurance are calculated on the reduced figure [11]. A sacrifice is not a deduction at all, which is why it cannot take pay below the National Minimum Wage [11].
Retail workers carry one extra safeguard. Where an employer deducts pay to cover till shortages or stock deficiencies, the deduction is capped at 10% of gross pay in any pay period, although the cap falls away on the final payslip when employment ends [10]. Workers in Northern Ireland enjoy equivalent protections under separate legislation [13].
When a deduction is unlawful
A deduction made without statutory authority, contractual basis or prior written consent is unlawful under section 13 of the Employment Rights Act 1996, and the worker can bring a tribunal claim within 3 months of the deduction [9]. Wages for this purpose include salary, holiday pay, statutory payments, commission and most bonuses [9].
The cleanest protection for an employer is process: a clear contractual deductions clause, written consent collected before the event, and payroll software that labels every deduction line so the payslip itself evidences compliance with section 8 [3]. Sole traders and micro-employers producing occasional payslips can achieve the same itemisation through an online payslip generator rather than a manual spreadsheet.
Conclusion
A UK payslip is a layered legal document. Statute takes the first slice through PAYE, National Insurance, student loans and auto-enrolment; courts and the DWP occasionally take a second slice through attachment orders; everything else requires the worker's documented agreement. The itemisation rules in the Employment Rights Act 1996 exist so each slice is visible and challengeable.
The direction of travel is towards more deduction types, not fewer, as the student loan system fragments into more plans and pension participation deepens. Payroll software that sequences deductions correctly, and explains each line on the payslip, does the compliance work that employers were once expected to do by hand.
Frequently asked questions
What deductions can an employer make without an employee's permission?
Only deductions required or authorised by legislation: PAYE income tax, employee National Insurance, student loan repayments, auto-enrolment pension contributions (subject to the opt-out right) and court-ordered attachments [2]. Anything else needs a contractual clause or the worker's prior written consent [9].
Why did a payslip deduction appear for a student loan that is already repaid?
Employers act on the notices HMRC sends them and cannot stop a deduction on the employee's word alone. The borrower should contact the Student Loans Company, which will tell HMRC to issue a stop notice to the employer [15]. Refunds of over-deductions come from the Student Loans Company, not from payroll.
How much can a Direct Earnings Attachment take from wages?
At the standard rate, up to 20% of net earnings; at the higher rate, up to 40% [8]. Whatever the rate, the deduction must leave the employee with at least 60% of their net earnings for the period.
Can an employer deduct money for a till shortage?
Only in retail employment, only with contractual authority or written consent, and only up to 10% of gross pay in any single pay period [10]. The 10% cap does not apply to the final payment of wages when the worker leaves.
