Every line below your gross pay is a deduction. Knowing which are compulsory and which are not is how you spot an error that is costing you money.
The difference between the salary you were promised and the money in your account is made up entirely of deductions. Some are legally compulsory, some you agreed to, and occasionally one appears that should not be there at all. Reading them line by line is the only way to know which is which.
Deductions split into two broad groups.
Statutory deductions are required by law and you cannot opt out:
Voluntary deductions are ones you have agreed to:
The distinction matters because it determines what you can challenge. You cannot opt out of Income Tax or National Insurance, but you can stop or change most voluntary deductions, and an employer cannot start a new voluntary deduction without your agreement. The order in which deductions are applied also affects the total: statutory deductions and pension contributions are generally calculated before voluntary repayments, and a student loan is worked out on a different threshold from Income Tax, which is why the figures rarely line up neatly.
Take Leah, paid £2,800 gross per month on tax code 1257L, with a 5% pension contribution and a Plan 2 student loan.
| Deduction | Monthly amount |
|---|---|
| Income Tax (20% above ~£1,047.50 monthly allowance) | ≈ £350.50 |
| National Insurance (8% above £1,048 monthly threshold) | ≈ £140.16 |
| Pension (5% of qualifying earnings) | ≈ £124 |
| Student loan (Plan 2, 9% above ~£2,274/month) | ≈ £47 |
| Total deductions | ≈ £661.66 |
| Net pay | ≈ £2,138.34 |
Leah's gross pay is £2,800 but she takes home around £2,138, so roughly 24% of her pay is deducted before she sees it. Each line is justified, but the only way to know that is to read them. If the tax figure looked wrong she could check her tax code and use the salary calculator to confirm the correct amount. The pension line, although a deduction, is money moving into her own retirement savings rather than to HMRC, which is a useful distinction to keep in mind when judging whether your deductions are working for you or simply against you.
Under the Employment Rights Act 1996, an employer cannot simply take money from your wages. A deduction is lawful only if it is required by statute, permitted by a written term in your contract, or you have agreed to it in writing beforehand. If an unexplained deduction appears, ask payroll for a breakdown in writing; if it cannot be justified, it may be an unlawful deduction that you can reclaim, ultimately through an employment tribunal if it is not resolved. Retail workers have an additional protection: deductions for cash shortages or stock losses are capped at 10% of gross pay in any single pay period. These rules exist precisely because deductions, once started, are easy to overlook on a busy payslip.
A deduction you understand is a fact of working life. A deduction you cannot explain is a question you are entitled to ask.
Sole traders do not have deductions taken at source because they are not on a payroll. Instead, their tax and National Insurance are calculated once a year on profit through Self Assessment, and from April 2026 reported via Making Tax Digital quarterly updates. The self-employed equivalent of deductions is allowable business expenses, which are subtracted from turnover to reduce taxable profit. People who are both employed and self-employed see PAYE deductions on their employment and settle the rest through their tax return.
TapTax connects to your bank, categorises expenses automatically, and submits quarterly updates to HMRC. Free plan, no card required.
