Introduction to Income Tax and NICs Deductions
3.2
Types of deductions
3.2.1 Statutory deductions
The following count as ‘statutory deductions’:
• Attachment order (such as Attachment of Earnings Order (AEO))
Deductions for Student Loans
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National Insurance contribution (NIC)
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• Income tax collected through Pay As You Earn (PAYE)
• Pension scheme contribution (but see ‘ Voluntary deductions ’ below).
3.2.2 Contractual deductions
The contract of employment may provide for deductions from pay to be made in a wide range of situations. Drawing up a comprehensive list of contractual deductions would be impossible, but examples include: • Recovery on termination of employment of overpaid holiday pay (where paid holiday taken exceeds entitlement)
Deductions for poor workmanship
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Damage to company property
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• Repayment of training course costs and study fees (such as on termination)
• Private use of a company asset (such as a company car)
• Recovery of medical insurance premiums
• Recovery of loans (such as Season Ticket Loans).
3.2.3 Voluntary deductions
Voluntary deductions are those where the employee either has given consent for the deduction to take place or has asked the employer to make the deduction on the employee ’s behalf.
Examples of voluntary deductions include:
Trade union subscriptions
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• Charitable Payroll Giving, which is a scheme approved by HM Revenue & Customs (HMRC) (often erroneously called ‘GAYE’ – Give as You Earn)
• Saving schemes (for example to buy shares in the employing company)
Credit union payments
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Sports club fees
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