Income Tax (Earnings and Pensions) Act 2003 section 331

Order for making deductions

Section 331 establishes the order in which deductions from employment earnings must be made, setting out a general rule and two important exceptions.

• The general rule is that deductions from earnings should be applied in whichever order produces the greatest reduction in income tax liability
• This general rule is subject to two specific exceptions where a prescribed ordering must be followed
• Certain deductions must be applied first when calculating "chargeable overseas earnings" for employees taxed on the remittance basis
• Deductions available under other provisions must be taken into account before the special deduction for seafarers' earnings is applied