Your first payslip: where the money went
You agreed a number. A smaller number arrived. Nobody sat you down and explained the difference, and the gap is big enough that most people your age quietly assume they have been short-changed. You have not been. Four separate things took a slice, each one has a rule, and one of them is a mistake that costs real money and only fixes itself if you notice it.
The number in the job advert is gross pay. What lands is net pay. In between sit income tax, National Insurance, a student loan repayment if you have one, and a pension contribution if you are enrolled. Only three of those are gone. The pension one is still your money, and your employer adds to it.
The whole thing, in one payslip
Take a real example you can check. The minimum wage for 21 and over is £12.71 an hour from 1 April 2026. Forty hours a week, all year, is £26,436.80 a year, or £2,203.07 a month before anything is taken. Here is what happens to it.
Put your own wage through the same sums. It runs on your phone and sends nothing anywhere.
Notice the last line. People talk about the pension deduction as though it vanished with the tax. It did not. It went into an account with your name on it, and your employer put roughly another £50 a month in beside it. That is the only line on the payslip that pays you.
The tax code, which is where the mistakes live
Somewhere on the payslip is a short code like 1257L. That is the normal one. It means the tax office knows who you are and has given you the full £12,570 tax-free allowance, spread evenly across the year.
Now the codes that mean something has gone wrong:
1257L W1, 1257L M1, or anything ending X. Emergency codes. Your tax is worked out on that week or that month alone, with no memory of what you earned before. Start a job in September and the system treats you as though you earn that much every month of the year, so you can be taxed on money you were never going to earn.
BR. Every penny taxed at 20%, with no tax-free allowance at all. Normally used for a second job. On your only job it is wrong.
0T. No allowance either, and it can tax you at higher rates. This is the one that hurts.
There is no letter. No alert. No one at work mentions it. If you are on the wrong tax code you simply receive less money, and unless you look at the code on the payslip you will never know why.
It happens constantly to people starting their first job, because the tax office has no record of you yet. Their own guidance says it can take up to 35 days to sort out once they have your details from both employers. Thirty five days is one or two full pay packets.
What speeds it up: hand your new employer the P45 from your last job, or fill in the starter checklist they give you, on day one and not in three weeks. Overpaid tax does come back, either automatically at the end of the tax year or sooner if you ask, but only after it has sat in somebody else's account for months.
The check takes five seconds. Find the code. If it ends W1, M1 or X, or reads BR or 0T, something needs fixing.
National Insurance, and what it actually buys
National Insurance is the second slice: 8% of everything you earn above £242 a week, dropping to 2% on anything above £967 a week. Earn under £242 a week and you pay none.
Unlike income tax, this one is a record as well as a bill. Your National Insurance record is what decides whether you get a State Pension decades from now, and it affects some benefits along the way. That is worth knowing at 18, when a pension is the least interesting object in the universe, because the clock has already started.
The student loan line, and the thing everyone gets wrong
You only see this line if you went to university and you earn above the threshold for your plan. Here are the 2026 to 2027 figures:
Plan 1, £26,900 a year. Plan 2, £29,385. Plan 4 in Scotland, £33,795. Plan 5, which is most people who started in England from 2023, £25,000. All four take 9%. A postgraduate loan starts at £21,000 and takes 6%.
Here is the part that is almost always misunderstood. The percentage is not 9% of your wages. It is 9% of the amount above the threshold. In the payslip above, on £26,437 with a Plan 5 loan, only £1,437 is above £25,000, so the repayment is 9% of £1,437, which is about £11 a month. Not £198.
Which raises a question worth sitting with rather than answering here: if the repayment is fixed by your income and not by the size of the debt, and the balance is written off after 40 years on Plan 5, in what sense is it behaving like a loan at all?
The pension you were put into without being asked
If you are 22 or over and earn £10,000 a year or more, your employer must put you into a pension automatically. You did not sign up. You can leave, and they are not allowed to push you either way.
The numbers: 8% total goes in, of which at least 3% comes from your employer and the rest from you, calculated on earnings between £6,240 and £50,270 a year. If you pay income tax, the government adds tax relief on top of your share.
So the arithmetic of opting out is simple enough to state without telling anyone what to do: you keep about £84 a month, and you decline about £50 a month that your employer would otherwise have paid you, plus the tax relief. Whether that trade suits your life right now is your call and nobody else's. Just make it knowing what is on both sides of it.
What this does and does not prove
It does not prove that any of these deductions are unfair, and it is not an argument for or against joining a pension. It proves that four different rules are being applied to your money at once, that every one of them is published and checkable, and that one of them goes wrong often enough that the tax office has a 35 day estimate for fixing it.
What it leaves open is what you do with the payslip once you can read it. Which is the only reason this page exists.
- The tax code. 1257L is normal. W1, M1, X, BR or 0T means look into it. This is the single highest value ten seconds on the whole page.
- The hours. If your pay varies with the hours you work, the law says the payslip must show the hours. Count them against what you actually worked.
- Gross against net. Both must be shown, along with every deduction that changes each time. Add the deductions up and check they explain the gap.
- Which student loan plan. Plans have different thresholds, and being put on the wrong one costs you every month. If you have no loan, there should be no line.
- Whether you are in the pension, and what the employer puts in. Their share is the number that matters, and it is not always the bare minimum.
- Keep every payslip. They are the proof of what you earned and what was taken. Renting, borrowing and arguing with anyone about pay all need them.
- Hand over the P45 or the starter checklist on day one. It is the difference between a correct first payslip and a wrong one you have to chase.
None of this tells you what to do with your wages. It tells you how to read what happened to them.
- Income tax. House of Commons Library, direct taxes 2026/27: personal allowance £12,570, 20% to £50,270, 40% to £125,140, 45% above. Unchanged from 2025/26. England, Wales and Northern Ireland; Scotland runs its own bands.
- National Insurance. Same briefing: employee Class 1 main rate 8%, primary threshold £242 a week, upper earnings limit £967 a week, then 2%.
- Minimum wage. GOV.UK minimum wage rates, from 1 April 2026: £12.71 for 21 and over, £10.85 for 18 to 20, £8.00 for under 18 and apprentices.
- Student loans. GOV.UK terms and conditions 2026 to 2027: Plan 1 £26,900, Plan 2 £29,385, Plan 5 £25,000 at 9%, postgraduate £21,000 at 6%. Plan 4 threshold from GOV.UK repaying your student loan: £33,795.
- Emergency tax codes. GOV.UK emergency tax codes: W1, M1 and X, tax worked out on that pay period alone, and "up to 35 days" for the code to be corrected once both employers have reported.
- The pension. GOV.UK joining a workplace pension: automatic from age 22 to State Pension age on £10,000 a year or more. Contributions: 8% total, at least 3% from the employer, on earnings between £6,240 and £50,270.
- What a payslip must show. GOV.UK payslips: pay before and after deductions, every variable deduction, and the hours worked where pay depends on them. On or before payday.
- Our arithmetic. £12.71 × 40 × 52 = £26,436.80. Tax: (26,436.80 − 12,570) × 20% = £2,773.36 a year, £231.11 a month. National Insurance: same slice × 8% = £1,109.34, or £92.45. Plan 5: (26,436.80 − 25,000) × 9% = £129.31, or £10.78. Pension: (26,436.80 − 6,240) × 5% = £1,009.84, or £84.15, with the employer's 3% adding £605.90 a year. Every step reproducible on a calculator.
Questions people ask
Why is my first payslip so much less than I expected?
Four things come out: income tax at 20% on earnings above £12,570 a year, National Insurance at 8% above £242 a week, a student loan repayment if you have a loan and earn above its threshold, and a pension contribution if you have been automatically enrolled. On £26,437 a year that is about £418 a month in total, leaving about £1,785 of a £2,203 gross. If the gap is bigger than that, check your tax code.
What is emergency tax and how do I get it back?
An emergency code taxes you on that pay period alone, with no memory of what you have earned so far this year, so you can pay too much. The codes look like 1257L W1, 1257L M1, anything ending X, or BR and 0T. Giving your employer your P45 or completing their starter checklist is what triggers the fix, and the tax office says the code can take up to 35 days to correct. Overpaid tax comes back automatically at the end of the tax year, or sooner if you contact them.
How much do I have to earn before I pay tax?
Income tax starts above the personal allowance of £12,570 a year in 2026 to 2027. National Insurance starts earlier, above £242 a week, which is about £12,570 a year as well. Below those you pay neither, though you may still be enrolled in a pension if you are 22 or over and earn £10,000 or more.
Do I have to pay back my student loan on a low wage?
Only above the threshold for your plan, and only on the part above it. Plan 5 starts at £25,000 and takes 9% of the excess, so at £26,000 you repay about £7.50 a month, not 9% of £26,000. Earn under the threshold and you repay nothing at all that month.
Should I opt out of my workplace pension?
This site does not tell anybody what to do with their money. What it can tell you is what is on each side. Opting out keeps roughly £84 a month of a £26,437 salary in your pocket now, and turns down roughly £50 a month your employer would have added, plus tax relief on your share. Your employer is not allowed to encourage or force you either way.
What has to be on a payslip by law?
Your pay before and after deductions, the amount of any deduction that changes each time you are paid such as tax and National Insurance, and the number of hours worked if your pay depends on time worked. Fixed deductions must be explained either on the payslip or in a written statement. It must reach you on or before payday.
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Last checked 26 August 2026.