Your payroll software will calculate how much income tax and National Insurance to deduct from your employees’ pay. These deductions are worked out using each employee’s tax code and National Insurance category letter.
You may also need to deduct student loan repayments, pension contributions, Payroll Giving donations and child maintenance payments.
Student and Postgraduate loan repayments
You’ll need to calculate and deduct how much they need to repay based on which plan they’re on. They repay:
- 9% of their income above £22,015 a year for Plan 1
- 9% of their income above £27,295 a year for Plan 2
- 9% of their income above £27,660 a year for Plan 4
- 6% of their income above £21,000 a year for Postgraduate loans
Make pension deductions after you take off National Insurance. You normally make pension deductions before you take off tax - check with your workplace pension provider.
You’ll also need to pay any employer contributions into your employee’s pension.
A new law means all employers will have to provide and pay into a workplace pension scheme for their employees - this is called ‘automatic enrolment’.
Your employees can donate to charity directly from their pay before tax is deducted using Payroll Giving.
Register with a Payroll Giving agency to set up a scheme. They’ll let you know how to make deductions.
As well as the usual payroll records, you must also keep the agency contract, employee authorisation forms and details of payments to the agency.
You may need to deduct child maintenance directly from a paying parent’s earnings or pension.