Tax and Starting Your First Job

Starting your first job usually means seeing PAYE Income Tax, National Insurance and a tax code on your payslip for the first time.

The important point is that they don’t all work in exactly the same way.

For the 2026/27 tax year, most people have a standard Personal Allowance of £12,570. This means you can usually receive £12,570 of taxable income over the tax year before Income Tax becomes due, although your allowance can be different depending on your circumstances.

National Insurance uses separate pay-period thresholds, so it can start being deducted even though the Income Tax calculation works across the tax year.

Here’s how it works.

What is PAYE?

PAYE stands for Pay As You Earn.

It’s the system most UK employers use to deduct Income Tax and National Insurance from your wages before paying you.

Your employer uses information supplied by HMRC, including your tax code, to work out how much Income Tax to deduct.

You’ll see the deductions on your payslip.

When do I start paying Income Tax?

For 2026/27, the standard Personal Allowance is £12,570.

For someone in England, Wales or Northern Ireland with the standard allowance, the main Income Tax bands are:

• Income up to £12,570 is normally covered by the Personal Allowance.

• Income from £12,571 to £50,270 is normally taxed at 20%.

• Income from £50,271 to £125,140 is normally taxed at 40%.

• Income above £125,140 is normally taxed at 45%.

Your Personal Allowance begins to reduce once your adjusted net income is above £100,000 and can fall to zero.

Scotland has separate Income Tax bands and rates, so Scottish taxpayers should use the current Scottish rates rather than these figures.

More on tax allowances

Does earning more than £12,570 mean tax comes off everything I earn?

No. Income Tax is normally charged only on the portion of your taxable income that sits above your available tax-free allowance and within each tax band.

If your standard Personal Allowance is £12,570 and you earn £20,000 over a complete tax year, that doesn’t mean the whole £20,000 is taxed at 20%.

PAYE spreads your tax calculation across the year, which is why your tax code and when you start a job can affect what comes off individual payslips.

When do I start paying National Insurance?

Most employees pay Class 1 National Insurance.

For 2026/27, most employees pay 8% on earnings between £242 and £967 a week, or between £1,048 and £4,189 a month.

Earnings above the upper threshold are generally charged at 2%.

National Insurance is normally calculated for each pay period. It doesn’t work in exactly the same way as the annual Personal Allowance for Income Tax.

What tax code should I have in my first job?

For many people receiving the standard Personal Allowance, 1257L is the familiar tax code.

Scottish and Welsh taxpayers may see an additional S or C prefix.

Your actual tax code can be different because HMRC takes account of your individual circumstances.

For example, taxable workplace benefits, another job, a pension, Marriage Allowance, earlier underpaid tax or tax relief for employment expenses can all affect your code.

What happens if I don’t have a P45?

If it’s your first job, you probably won’t have a P45 from a previous employer.

Your new employer should ask you to complete HMRC’s starter checklist so they have the information needed to put you on payroll.

Complete it accurately, particularly questions about other jobs and student loans.

If your employer doesn’t have enough information, you may temporarily be put on an emergency tax code.

For 2026/27 the emergency tax codes include W1, M1 and X.

An emergency code can mean the tax calculation is based only on that particular week or month rather than taking your earlier pay and tax for the year into account.

How do I know if my tax code is right?

Check the tax code on your payslip and compare it with the code HMRC shows in your Personal Tax Account or HMRC app.

If you’ve only just started the job, HMRC says new employment details can take several weeks to appear.

A strange-looking code doesn’t automatically mean it’s wrong. Tax codes change for a range of legitimate reasons.

If the details HMRC holds about your income are incorrect, you can update them directly with HMRC.

What if I have two jobs?

You still only have one Personal Allowance for the tax year, even if you have several jobs or pensions.

Each PAYE employment will normally have its own tax code.

One job might use some or all of your Personal Allowance while another is taxed using a code such as BR, D0 or D1. HMRC can also allocate your allowance differently depending on your circumstances.

What matters is your total income across all your jobs.

That’s why it’s worth checking all of your tax codes if you start a second job.

What about student loan repayments?

Student and postgraduate loan repayments are separate from Income Tax and National Insurance.

For 2026/27, the annual repayment thresholds are £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4 and £25,000 for Plan 5.

The postgraduate loan threshold is £21,000.

Plans 1, 2, 4 and 5 are generally repaid at 9% of earnings above the relevant threshold. Postgraduate loans are generally repaid at 6% above their threshold.

Your employer normally deals with the deductions through payroll once they have the correct information.

Could I pay too much tax in my first job?

Yes. It can happen if, for example, you’re temporarily put on an emergency tax code, your employer has incomplete information or you start or stop work part-way through a tax year.

You could also be due tax relief if you pay qualifying job expenses yourself and meet HMRC’s rules.

HMRC may correct some overpayments automatically, including through a P800 calculation after the end of the tax year.

If you think you’ve paid too much, check your HMRC record rather than assuming that every deduction is wrong.

What if I’ve paid too little tax?

HMRC may also find that you haven’t paid enough.

That usually means the underpaid amount needs to be collected or paid. A wrong tax code does not automatically mean you receive a fine or penalty.

If your code or income details look wrong, correcting the information early can help prevent the difference becoming larger.

What happens when I leave my first job?

Your employer should give you a P45 showing your pay and tax details for that employment.

Keep it safe and give the relevant part to your next employer.

Your final payslip, P45 and P60 are useful records if you later need to check how much tax you paid.

What's the difference between a P45 and a P60?

Do I need to keep my payslips?

It’s sensible to keep your payslips and PAYE documents, especially your P45 and P60.

You should also retain evidence of any employment expenses for which you intend to get tax relief.

The exact legal record-keeping requirement depends on whether you also need to complete Self Tax Return Assessment, so there isn’t one universal “22-month rule” that applies to every PAYE employee.

What should I check on my first payslip?

Look at your gross pay, Income Tax, National Insurance, pension contributions, student loan deductions where relevant and your tax code.

If something doesn’t make sense, check the information HMRC and your employer hold before assuming the deduction is incorrect.