First-time workers

When you start work as an employee for the first time, there are lots of things to think about. In addition to settling into your job, you need to understand your tax position.

When you become an employee, your employer is responsible for deducting income tax and National Insurance contributions (NIC) from your salary before you receive it. This system is called Pay As You Earn (PAYE).

We would encourage all employees to look at our pages on PAYE and tax codes, as you will pick up useful information to stand you in good stead for dealing with your tax affairs, now and in the future.

You can use this page as a checklist for things related to tax and PAYE to consider when you first start work – we also direct you to further guidance.

⚠️ NOTE: If you are starting self-employment, you will find useful information in our section on self-employment.

You may also find our list of the most commonplace tax issues that newly arrived migrants face useful, as there will be some overlap with tax issues that first time workers face.

Income tax and National Insurance contributions

Income tax

You pay income tax on your taxable income. Normally, income from employment is taxable. There is more information about what employment income is taxable on the page What income is taxable?. When you are an employee, your employer usually collects income tax from your wages via the PAYE system.

Nearly everyone who lives in the UK is entitled to a tax free personal allowance. This is the amount of taxable income you can receive each year without having to pay tax on it. The basic personal allowance is £12,570 for 2023/24. There is more information about the personal allowance, and other allowances, in our tax basics section.

When you are an employee and paid under PAYE, your personal allowance is spread equally over the tax year, rather than given to you all in one go or up front. Your ‘tax code’ (see below) tells your employer what amount of tax-free earnings (usually just the relevant proportion of your personal allowance) you are entitled to in a particular pay period, so that tax at the appropriate rates may be calculated on the balance.

The way PAYE works means that you may have income tax deducted from your wages throughout the year, even if overall, you actually earn less than the personal allowance. You can usually get any PAYE overpaid throughout the year back, as a tax refund.

For the 2023/24 tax year there are three main rates of income tax. You can check these in our tax basics section. Be careful because the thresholds are different if you are a Scottish taxpayer.

There is more information about the tax rates and how they apply to your earnings on our page What tax rates apply to me?.

National Insurance contributions (NIC)

When you first start work, you need to tell your employer your National Insurance number (NINO) to make sure the income tax and NIC you pay are properly recorded. You will find your NINO on the NINO card or notification letter you received from HMRC when you turned 16.

There is more information about NINOs, including how to confirm your NINO if you can't find it, in our tax basics section.

Most employees pay NIC on their wages via the PAYE system – your employer normally deducts NIC together with income tax before paying you your net pay.

The NIC you pay can earn you the right to receive certain state benefits, including the state retirement pension. You can find out more information about NIC in our tax basics section.

The page What National Insurance do I pay as an employee? contains detailed information about employee NIC.

Payslips

You should always receive a payslip each time you are paid, this can be printed on paper, handwritten or an electronic copy for example. How often you get a payslip will depend on how often you are paid. It is usually weekly or monthly.

Whatever payment method your employer adopts, they must always provide you with a payslip each payday. If your employer does not give you a payslip each payday, you should ask for one. You can bring a claim in the Employment Tribunal if your employer doesn’t provide you with a payslip.

The payslip has to show a number of things, by law. The main ones are your gross wages (the amount before anything is taken off), the income tax and NIC deducted under PAYE, any other fixed deductions from gross pay (suitably itemised), the number of hours you worked (if your pay varies depending on time worked) and your net wages (the amount you actually receive).

It may also show your National Insurance number (NINO), your PAYE code (more on this below), your employer’s PAYE reference and how you will be paid, for example, in cash, by cheque or directly to your bank. You can find more information on the ACAS website.

You should check the personal information on it carefully and in particular, the gross pay figure – have you been paid what you expected/what you are due by law, for the hours you worked?

You should also check carefully any deductions that have been made. As well as tax and NIC, you may see:

• Pension contributions, if you are a member of a workplace scheme, including schemes introduced as a result of auto enrolment
• Student loan repayments
• Anything else that you have authorised your employer to deduct (for example costs of disclosure checks, uniforms or union costs)

If you are concerned that an unauthorised deduction has been made from your wages (an unauthorised deduction can include not receiving any of the pay you were expecting at all), you should look at the ACAS website.

Keep every payslip in a safe place – you may need them to prove your income or if you have paid too much tax, you may need the details to claim it back.

IMPORTANT NOTE: Some employers password protect payslips that they have sent for security and some have an online secure storage facility where they make your payslips available. We know it is easy to forget log in details and passwords, but make sure you can access your payslips and do go in and check them regularly rather than just relying on the amount of net pay you receive being about right. This will help you spot if there are any problems with the way your employer is dealing with your pay and taxes. If you leave a job, make sure you download copies of all your electronic payslips before you leave as you may be unable to access them after you have left.  

There is an example payslip and some help with understanding the typical deductions made, on the Understanding your payslip page in the resources section.

⚠️ Note that not all payslips look the same, but they should all contain similar types of information.

If you are paid in cash and/or do not receive a payslip, you should read the guidance in our migrants section. 

PAYE forms

Starter Checklist (used to be known as form P46)

When you start work for the first time, you will not have a form P45, so your employer should ask you to complete a Starter Checklist (this used to be known as form P46).

The checklist asks you for certain information to help your employer allocate an ‘emergency’ tax code and work out the tax due on your first payday. Your employer will send the information that you give on the checklist to HMRC. HMRC will process the information you have provided on the Starter Checklist and where necessary, revise your emergency tax code to a proper tax code. You can find more about emergency tax on the page How do I check my coding notice?. Note - often, the ‘emergency’ tax code that you are allocated as part of the starter process does not need changing as it will be correct for your circumstances, and can be used on an ongoing basis by your employer.

The Starter Checklist requests information like:

• your NINO;
• whether you have been claiming jobseeker's allowance or employment and support allowance;
• whether you have got a second job;
• whether you are paying off a student loan.

It is important that you complete the Starter Checklist or provide the relevant information your employer has asked you for, as soon as possible before your first payday, so your employer knows what tax code to use. If you do not provide this information, you could end up paying way too much tax through having an 0T code operated.

It is also important that you complete the Starter Checklist correctly - one major cause of tax problems for those in employment, is the incorrect completion of the Starter Checklist – in particular picking the wrong employee statement (A, B or C). You can read more about this in our news piece Why completing a Starter Checklist CORRECTLY when starting a new job really does matter!

If you are not sure which employee statement to pick as your situation does not fall neatly into scenarios A, B, or C, read our news piece ‘How do I complete the starter checklist if…’.

⚠️ Give the completed checklist to your employer. Do not send the checklist to HMRC. Keep a copy of the checklist for your own records.

The checklist is available on GOV.UK.

There is an illustration of how to complete a Starter Checklist in the resources section.

Form P60

Form P60 is an annual summary of all your payslips. If you still work for your employer at the end of the tax year, they must give you a form P60 by 31 May. Note that a tax year runs from 6 April to 5 April, so the tax year 2023/24 ends on 5 April 2024. If you are working for an employer at 5 April 2024, they must provide you with form P60 by 31 May 2024.

Keep your form P60 as a record of your pay and the tax that was deducted. You must keep your P60 safe. If you lose it, your employer may be able to give you a copy, which will be marked “duplicate”.

Form P45

Form P45 is a record of your pay and tax deductions to date in the tax year. When you stop working for an employer, they should give you a form P45. It shows details like:

• your tax code and PAYE reference number;
• your leaving date;
• your wages so far in the tax year – 6 April to the following 5 April;
• how much tax was deducted from your wages.

A form P45 has four parts. Your employer sends the information in Part 1 to HMRC and gives you the other three (Parts 1A, 2 and 3). When you start a new job, give two parts (Parts 2 and 3) to your new employer and keep the other one (Part 1A) for your own records.

There is more information about form P45 on the page How do I check my coding notice?.

You should keep your P45 safe as your employer will not be able to provide you with a duplicate if you lose it. But your employer should be able to provide you with a ‘statement of earnings’ on company-headed paper. This acts as a replacement for a P45.

PAYE coding notice and tax codes

When you start work, HMRC may issue a PAYE code to your employer, to tell them how much tax to take off your income. HMRC may also send you a copy of this PAYE code – this is your PAYE coding notice (form P2). Your payslips should also show the PAYE code that your employer is using and you can always check this in your Personal Tax Account.

As stated above, if you are undergoing the new starter process HMRC may not need to issue a different PAYE code or may not have enough information to issue a different PAYE code. So, your employer may use the tax code generated by the Starter Checklist on an ongoing basis, or until HMRC have more information and issue a corrected tax code.

There is more information on how the PAYE system works, PAYE coding notices and tax codes, including emergency tax codes, on the page How do I check my coding notice?.

Tax refunds

You may sometimes pay too much tax on your employment income through the PAYE system. For example, where you have paid emergency tax at the beginning of a new job or where you have tax deductible employment expenses.

You can find more information about why you might have paid too much tax and how to claim a refund of tax in our page What if I pay too much tax?

There are lots of organisations out there who will help you trigger your tax refund – for a fee. However, more often than not, it is straightforward for you to do things for yourself and avoid incurring fees unnecessarily. Moreover, using such a company does not mean that things will be ‘sped up’ as HMRC deal with refund processing on a first-come first-served basis and - worse - you may even find yourself with some serious problems.

We provide information about what to consider before using a tax refund company to help submit your tax repayment claim, in the tax basics section.

Apprentices

Apprenticeships can offer a gateway into a variety of careers. There is a common misconception that apprentices do not have to pay tax. This is not the case. Apprentices have to pay income tax in the same way as everyone else.

You can read more about apprentices on our dedicated page.

Migrant workers

If you are working here from overseas and would like information or guidance on your tax position while you are in the UK, see our migrants section.

Working for an agency, including through an umbrella company

Agency work can often be a stepping-stone into a permanent job for first time workers. It can also be a good option if you wish to gain experience and employability. But there are some complexities to be aware of, particularly if you are asked to work through an umbrella company.

To find information to help you if you work through an agency or other intermediary like an umbrella company, look at Am I employed, self-employed, both or neither? in the employment section.

Note that if you are new to umbrella working, you may be hearing lots of new words or phrases for the first time and not know what they mean. In an article written for IWORK, we explain some of the terminology used.

Tax and NIC treatment of tips

Your first job may be in the hospitality or catering industry and you may receive tips.

If you receive tips from customers, you have to pay income tax on them, but you may not have to pay NIC. The way in which you work out your tax/NIC on tips depends on who the tips are given to and who decides how to share the tips.

We give you some tips about the tax treatment of tips in our news piece.

Cashless tipping is becoming more and more common. HMRC have recently updated guidance on tips, gratuities, service charges and troncs to confirm that the basic principles (as set out in our news piece) apply.

Starting work after claiming jobseeker’s allowance or employment and support allowance

When you stop claiming jobseeker's allowance or employment and support allowance to start work for a new employer, the Department for Work and Pensions (DWP) should issue a P45(U) or P45(ESA), which you should give to your new employer.

This summarises the amount of taxable benefit received. It is important to be aware that although the benefits may be taxable, no tax is taken off when you receive them.

This does not really matter that much because on their own, the amounts involved are below the threshold for paying tax (£12,570 for most people in 2023/24, which works out at about £242 per week or £1,048 per month). However, it is important to be aware that any taxable welfare benefits you have had in the earlier part of the tax year will reduce the amount of personal allowance available to use against your earnings over the remainder of the tax year.

Provided you give your new employer a P45(U) or P45(ESA), the way that PAYE usually works (that is, on a cumulative basis) means that your tax position should work itself out by the end of the tax year. If for whatever reason this does not happen, HMRC should check the total amount of tax you have paid at the end of the tax year via the P800 process. If it is too much, they will give you a refund. If it is too little, they will usually try and arrange a suitable method of payment with you.

If you cannot give your new employer a P45(U) or P45(ESA), you need to help your new employer understand what tax code to use by completing a Starter Checklist.

You are asked which statement applies:

• This is your first job since last 6 April and you have not been receiving taxable jobseeker's allowance, employment and support allowance or taxable incapacity benefit, state pension or occupational pension.
• This is your only job, but since last 6 April you have had another job, or have received taxable jobseeker's allowance, employment and support allowance or taxable incapacity benefit. You do not receive state or occupational pension.
• You have another job or receive a state or occupational pension.

Unless you have another job, it is important to tick box B. We explain why this is important in our website guidance What is an emergency tax code? Ticking box A can lead to you being given the benefit of the full tax free personal allowance to set against your employment earnings, which may mean that you have an underpayment in respect of the benefits at the end of the tax year.

If you have more than one job

If you start a second job without giving up your other one, you will not get a form P45 – you should ask your new employer for a Starter Checklist to complete, and let them know that you already have another job by ticking box C. You do not have to tell your second employer where you are working or how much you are earning. Your second employer will send the relevant information to HMRC and they should review your tax code.

HMRC should issue a separate tax code to each employer telling them what tax allowances you get. Your personal allowance will normally only apply to your main job.

To avoid paying too much tax you can ask HMRC to split your personal allowance between your jobs. For example, if you do not pay tax on your earnings from your first job you can use any spare personal allowance against your other job or jobs. Note that although HMRC send a separate tax code to each of your employers, they only send you one coding notice that should mention all of your employments.

If you have got several sources of income that are taxed through PAYE it can get confusing. Check your payslips carefully to make sure you are paying the right amount of tax and receiving the correct personal allowance.

For more information and examples concerning multiple jobs, take a look at the page Having more than one job.

You may also find our news piece Any questions? I’m not paying National Insurance in either of my holiday jobs – how will I be affected? useful in understanding how having several low income jobs can affect your entitlement to contributory benefits and the state pension.

If you change jobs or if you leave a job

If you change jobs

When you leave a job where you have paid tax through PAYE, your employer will give you a form P45. You will give Parts 2 and 3 to your next employer so they know what tax you have paid so far in the tax year. Your employer should automatically give you a form P45 when you stop working for them. If not, ask for it – you are entitled to it by law.

If you don't have your form P45, tell your new employer – they should ask you to complete a Starter Checklist. You should complete the Starter Checklist as soon as possible before your first payday, so your employer knows what tax code to use. Give the completed Starter Checklist to your employer and keep a copy for your own records. Do not send the checklist to HMRC.

If you change jobs often

It is especially important that you provide your employer with a completed Starter Checklist or form P45. If you do not provide this information, you could end up paying too much tax.

If you are leaving a job

If you are leaving a job, but not starting another one (for example, because you are going to study or are going travelling), make sure you get a form P45 from your employer when you leave. You may need it to claim any tax refund you are owed, for example via the form P85 or P50 process (explained further on the page linked to).

If you are claiming benefits after leaving a job

If you are starting to claim jobseeker's allowance or employment and support allowance after leaving your job, you need to give your form P45 to the DWP. They will then put the details from your earlier paid work onto their system. If you are due a tax refund from your paid work, you will not get this refunded until the earlier of:

     - ceasing to claim jobseeker's allowance or employment and support allowance – in which case your refund comes from Jobcentre Plus;
     - the end of the tax year (for continuing claims).

If DWP does not issue the refund automatically, you should contact HMRC to claim it. 

Student loan repayments

If you have got a student loan to repay and you are employed, you normally repay the loan through your wages under PAYE. This normally happens automatically the April following your graduation, provided you have started working and are earning more than the repayment threshold.

HMRC provide your employer with the information they need to deduct the right amount from your wages. In order to calculate the correct repayment it is important that you note on the Starter Checklist what kind of loan you have (for example, a Plan 1 or Plan 2, or postgraduate loan). If you do not know what loan you have, the guidance on GOV.UK may help you. You may also find the annotated Starter Checklist in our students section helpful.

Your payslip must show how much has been deducted. It is useful to keep all your payslips while you are repaying your student loan in case there is a discrepancy about the amounts of repayments you have made.

There is more information about how you repay your student loan in our student loans section. Please note that this section only covers how repayments work for what are known as income-based or income-contingent loans, introduced in the autumn of 1998. We do not look at the loans, often known as ‘mortgage-style loans’, in place before that time.

National minimum wage and national living wage

Under law, employees and ‘workers’ are entitled to certain rights, including a minimum wage.

You can find out more information about the national minimum and national living wage on the page What is the national minimum wage?.

Pensions and automatic enrolment

Pensions are a way of helping you to save up to pay for your living costs during retirement.

The government want to encourage you to provide for your own retirement, rather than rely on the state so have introduced automatic enrolment.

You can find out more information about automatic enrolment in our website guidance.

Growth on pension savings is generally free of tax. When pensions are paid out to you they are taxable, but you should be able to take some part of the pension as a tax free lump sum.

There is more information about pensions generally, including the state pension in the tax basics section and further information in relation to pensions and employees on our page Pensions and employees.

Tax credits and benefits

You may be able to claim tax credits, universal credit or state benefits while you are working, depending on your circumstances.

You can find more information about tax credits and universal credit and who can claim them in our tax credits and benefits section.

Changes to your pay or working pattern

You and your employer are free to agree on whatever terms and conditions you choose, subject to the various minimum rights and protections set out in employment law. For example, in terms of pay, your employer must pay you the National Minimum Wage (NMW) for any hours you actually work.

If your employer wants to change your contract, you can find some relevant information on GOV.UK. This advises that usually, the employer and employee both need to agree to any contract changes.

If changes are made to your pay or working pattern, this could impact the amount of income you receive and therefore the amount of tax and NIC that you pay. If a reduction is made to your income/hours, you will also need to consider carefully the effect that this may have on things like:

• your holiday entitlement
• any pension scheme you are contributing to
• entitlement to tax credits or universal credit – tax credits are being replaced by universal credit. Unlike working tax credit, you do not need to work a minimum number of hours to qualify for universal credit but there may be a minimum amount that you are expected to earn. You can find out more about universal credit on our specialist website RevenueBenefits
• entitlement to state pension or other benefits such as Statutory Maternity Pay. (Workers who consistently earn below the National Insurance lower earnings limit (LEL) may fail to qualify for a range of contributory benefits such as contributory jobseeker's allowance and the state pension. In addition, entitlement to both Statutory Sick Pay and Statutory Maternity Pay are also dependent on whether earnings are above or below the LEL. The LEL is £123 per week in 2023/24.

Record keeping

What records should you keep?

You should keep the paperwork that contains details about your pay and tax, like:

• payslips and PAYE coding notices;
• forms P45 and P60;
• details of employment expenses;
• benefits in kind forms from your employer;
• information on any workplace pension scheme you join;
• information about any redundancy award or termination payment you get when your contract ends;
• notes of any tips or gratuities you get and any other taxable income or benefits that you have not already recorded somewhere else;
• details of any state benefits you have received.

If anyone (other than your employer) gives you benefits-in-kind for doing your job, you should keep a note of their name and address and what they gave you.

Why should you keep records?

It is always a good idea to keep pay records as you many need them if you ever want to prove your income, for example, to get a loan. You will also need to refer to your records later if you ever need to:

• complete a Self Assessment tax return;
• claim a refund of overpaid tax;
• apply for tax credits and benefits.

How long should you keep records?

You should keep your records for at least 22 months from the end of the tax year they relate to. The tax year runs from 6 April to the following 5 April, so keep paperwork until at least 31 January nearly two years later. For example, you should keep records relating to the tax year 2023/24 (which ends 5 April 2024) until 31 January 2026 or longer if you are self-employed.

There is no harm in keeping them longer than strictly required. In particular, it is possible to go back up to four tax years to claim some reliefs and to claim a tax refund. In order to make those claims you need supporting evidence, so it would be helpful to keep records for at least four years after the end of the tax year.

Where can I get further help and information?

You may find our Getting Help section useful.

Here we also highlight additional guidance and websites which may help first time workers and be useful for you to know about.

Advisory, Conciliation and Arbitration Service (ACAS)

ACAS provide information on employment rights and work issues generally, together with a confidential helpline.

Gangmasters & Labour Abuse Authority

The Gangmasters & Labour Abuse Authority regulates those who supply labour or use workers to provide services in agriculture, forestry, horticulture, shellfish gathering and food processing and packaging. Its aim is to protect vulnerable and exploited workers. The website provides useful information on workers’ rights.

Health and Safety Executive

The Health and Safety Executive helps workers understand how they can stay safe and well at work. The website provides information for all workers on their rights and responsibilities in relation to health and safety issues at work.

LawWorks

LawWorks is a charity that operates in England and Wales. The website guides you to lawyers who give their time free of charge to members of the public on a low income to help solve legal problems, including those to do with work.

MoneyHelper

This is a website to help you make the most of your money, which was set up by the government. It provides guidance on improving your finances, as well as tools and calculators. It operates UK-wide.

TaxAid

TaxAid is a UK charity providing free tax advice to people who cannot afford to pay a professional adviser. The service is independent and confidential.

TUC

The Trades Union Congress (TUC) organisation provides useful information on worker rights. You can also find your most suitable trade union on their website (a trade union is an organised association of workers in a particular job, trade or profession, formed to protect and further their rights and interests).