Starting Your First Job: Tax Basics

What Gets Deducted from Your Pay

When you start working, your employer deducts several things before you receive your pay:^[1]

Income Tax — if you earn above your Personal Allowance (£12,570)
National Insurance — if you earn above £12,570 per year (£242/week)
Student loan repayments — if applicable, once you earn above the threshold
Pension contributions — your employer must auto-enrol you if you’re eligible

Your Personal Allowance

The first £12,570 you earn each year is tax-free. You only pay Income Tax on earnings above this. Your tax code (usually 1257L) tells your employer to spread this allowance across the year.^[3]

Your Tax Code

When you start a new job, your employer needs your tax code. If it’s your very first job, you’ll fill in a Starter Checklist (which replaced the old P46). Based on this, HMRC assigns your code.^[3]

Emergency tax: If HMRC hasn’t issued a code yet, your employer may use an emergency tax code. You could temporarily pay more tax than expected, but it’ll be corrected.

National Insurance

Employee NI is charged at 8% on earnings between £12,570 and £50,270, and 2% above that (2026/27 rates). Your NI contributions build your entitlement to the State Pension and other benefits.^[2]

Reading Your Payslip

Your payslip shows:

Gross pay — your total earnings before deductions
Tax deducted — Income Tax for the period
NI deducted — National Insurance for the period
Pension deducted — your auto-enrolment contribution
Net pay — what actually hits your bank account
Tax code — the code used to calculate your tax

Student Loan Repayments

If you have a student loan, repayments start automatically through your pay once you earn above the threshold (e.g. £29,385 for Plan 2). Your employer deducts 9% of earnings above the threshold.^[5]

Your P60

At the end of each tax year (after 5 April), your employer gives you a P60. This summarises your total pay and tax deducted for the year. Keep it — you may need it for tax refund claims or mortgage applications.^[4]

Frequently Asked Questions

How much can I earn before paying tax in my first job?

You can earn up to £12,570 per year (the Personal Allowance) before you pay any Income Tax. Your tax code 1257L tells your employer to spread this tax-free amount evenly across the year.

What is an emergency tax code?

If HMRC has not yet issued your tax code when you start a new job, your employer may use an emergency tax code. This can mean you temporarily pay more tax than expected, but it will be corrected once your proper code is assigned.

When do I start paying National Insurance?

Employee NI is charged at 8% on earnings between £12,570 and £50,270 per year. If you earn below £12,570, you do not pay NI.

What is a P60?

A P60 is a certificate your employer gives you after each tax year (after 5 April) summarising your total pay and tax deducted for the year. Keep it safe as you may need it for tax refund claims or mortgage applications.

Sources

Income Tax — GOV.UK
National Insurance — GOV.UK
Tax codes — GOV.UK
Get your first P60 — GOV.UK
Student loan repayments — GOV.UK