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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Starting work as an employee

We look at the various issues and concepts that you may come across and need to understand when you first start work as an employee.

Content on this page:

Introduction

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.

If you are starting self-employment, you will find useful information in our pages on self-employment.

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 pageTaxable employment income. 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.

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 you are entitled to in a particular pay period.

The way PAYE works means that you may have income tax deducted from your wages throughout the year, even if overall you 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. The rates and 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 Income tax.

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.

There is more information about NINOs, including how to confirm your NINO if you can’t find it, on our page National Insurance numbers.

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 pension. You can find out more information about NIC on our page National Insurance.

The page NIC for employees 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. 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.

You can read more about payslips on our page Getting paid.

PAYE forms

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 on 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, and
  • how much tax was deducted from your wages.

There is more information about form P45 on the page Changing jobs/work changes.

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.

You may need form P45 if you wish to claim an in-year repayment of tax or if you are leaving the UK to love abroad and are completing form P85.

Starter checklist (previously 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). You might also need to complete a starter checklist if you are starting a new employment following a period of self-employment, or if you are otherwise returning to work part way through a tax year and have not been employed since the beginning of the tax year. See further down this page about starting work after claiming benefits.

There is an illustration of how to complete a starter checklist, and guidance on selecting the correct employee statement, on the page Starter checklist.

PAYE coding notices 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.

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. You read more about this on our page Starter checklist.

There is more information on how the PAYE system works, PAYE coding notices and tax codes, including emergency tax codes, in our Tax and NIC section.

Tax refunds

You may sometimes pay too much tax on your employment income through the PAYE system.

You can find more information about why you might have paid too much tax and how to claim a refund of tax on our page PAYE tax refunds.

There are lots of organisations out there who will help you trigger your tax refund – for a fee. However, often, it is straightforward for you to do things for yourself and avoid incurring fees unnecessarily. We provide information about what to consider before using a tax refund company to help submit your tax repayment claim on our page Tax refund companies.

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 must pay income tax in the same way as everyone else.

You can read more about apprentices on our dedicated Apprentices 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 International section.

Agency workers and umbrella companies

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.

We have guidance for Agency workers and for Umbrella company workers.

Starting work after claiming benefits

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. 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 via the P800 process. For more information see PAYE at the end of the tax year.

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. There is more guidance at Starter checklist.

Having 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 show all 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, look at Multiple jobs.

Changing or leaving jobs

You can read more about you need to do when you change jobs and other work changes at Changing jobs/work changes.

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. 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 our page Annotated starter checklist: student loans 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 at Student loan repayments.

National minimum wage

You can find information about the national minimum wage and national living wage on the page National minimum wage.

Pensions and automatic enrolment

There is information about workplace pensions on our page Workplace pensions.

You can find out about automatic enrolment on our page Pensions: auto-enrolment into workplace pensions.

We also have information about the State pension.

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 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.

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 carefully consider the effect that this may have on things like:

Record-keeping

Records you should 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, and
  • 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.

Reasons to keep records

It is always a good idea to keep pay records as you may 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:

How long to 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. It is possible to go back up to four tax years to claim some reliefs and to claim a tax refund. 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.

More information

Here we 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).

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