Starting Your First Job: Pay, Tax and Pension

Starting a first job brings a set of money tasks most people have never done before: giving an employer the details they need to work out your pay and tax, reading a payslip with deductions on it for the first time, and being put into a workplace pension automatically. All of these follow set rules, and most of the numbers are fixed in law, so it is worth knowing what to expect before your first payday.

The biggest of these is the workplace pension. Since automatic enrolment began, all employers must organise pensions for their employees, and most people earning more than £10,000 a year are put into a scheme automatically unless they opt out¹. A percentage of your pay goes in every payday, your employer adds money too, and the government adds tax relief. The legal minimum total contribution is 8% of your qualifying earnings, which is a band of £6,240 to £50,270 a year for the 2026/27 tax year².

Your first payslip: tax, deductions and getting paid

Your first payslip will show your gross pay and then a list of deductions before the net pay that actually reaches you. The main ones are Income Tax and National Insurance, and possibly a student loan repayment and a pension contribution.

If this is your first job, you will not have a P45 from a previous employer, so your employer will ask you to complete the starter checklist, which gives them the details they need to work out your pay and tax⁸. Without it, or before your tax code is confirmed, you can be taxed on an emergency basis, which often means too much tax is taken at first. The tax code tells the employer how much of your pay to tax and at what rate; tax reliefs can reduce the tax you pay if you qualify for them⁹. If the code is wrong, it can be corrected, and any overpaid tax comes back to you.

National Insurance is worked out on earnings bands. For the period from 6 April 2026 to 5 April 2027, the employer earnings band for Class 1 National Insurance runs from £481.01 to £967 a week, which is £2,083.01 to £4,189 a month¹⁰. Your National Insurance number is yours for life and is what ties your contributions to your record, which matters later for benefits and the State Pension.

If you took out a student loan, repayments are deducted through pay, and your first repayment will be due in the April after you leave your course¹¹. The student finance page covers how loans and repayments work in more detail.

To be paid, you need an account that can receive electronic payments. Most people use a current account, and some accounts require you to pay in a minimum amount each month, such as £80¹². If a mainstream bank account is not an option, some credit unions offer current accounts, and some of those also require a minimum monthly pay-in¹³. Your employer will ask for your account details when you start.

What a workplace pension is and how the money builds up

A workplace pension is a way of saving for your retirement that is arranged by your employer¹. Some are called "occupational", "works", "company" or "work-based" pensions, but they are the same thing. A percentage of your pay is put into the pension scheme automatically every payday, and in most cases your employer also adds money into the scheme for you¹. The government also pays into it, in the form of tax relief¹⁴.

In the most common type, the defined contribution scheme, your employer chooses a pension provider to invest your pension contributions¹⁵. The money is invested and, broadly, the pot you end up with depends on what has been paid in and how the investments have performed. When you eventually take the money, 25% is tax free but you pay Income Tax on the rest¹⁶.

Three parties are therefore paying into your pot: you, your employer and the government. That is the core reason a workplace pension is unusual among savings products, and it is what you give up if you opt out. The pensions section explains the different types of scheme in more detail.

Automatic enrolment: who gets put in and when

Your employer must automatically enrol you into a workplace pension scheme unless you are already in a suitable scheme¹⁷. Most employees who earn more than £10,000 a year are eligible¹⁷, and employees who earn more than that threshold are automatically enrolled unless they opt out⁴.

The rules were introduced in stages. The government phased in automatic enrolment by employer size between October 2012 and February 2018, starting with the largest employers¹⁸. It applies only to employees: the self-employed are not eligible for automatic enrolment²⁰, and gig economy workers who are not employees fall outside it too¹⁸.

There are some timing points worth knowing. Your employer can postpone enrolment for up to three months, and can pay the first three months of contributions as a lump sum on the 22nd of the fourth month⁵. This is sometimes used to manage refunds for staff who leave quickly. If you are not automatically enrolled because you earn between £6,240 and £10,000 a year, you still have the right to join the pension if you want to, and you and your employer will both pay into it²¹. Earnings are assessed on what you are actually paid, so additional earnings such as paid overtime that push a single pay packet over the threshold mean your employer will automatically enrol you²¹.

The 8% minimum, and how it is split

The legal minimum total contribution under automatic enrolment is 8% of qualifying earnings². Of that minimum, the largest share comes from you, including the tax relief added on top, and the rest comes from your employer.

Employers must pay at least the minimum contributions to the pension scheme on time, usually by the 22nd of each month⁵. Many employers pay more than the minimum, and many schemes let you pay more as well; the split above is the floor, not the ceiling.

The percentage is applied not to your whole salary but to your qualifying earnings, which is the band explained next. That distinction matters most for people earning near the bottom or the top of the band.

Qualifying earnings: the £6,240 to £50,270 band

Qualifying earnings are the slice of your pay on which the 8% minimum is calculated. For the 2026/27 tax year the range is between £6,240 and £50,270 a year, which is £520 and £4,189 a month, or £120 and £967 a week³. The upper limit of £50,270 for a 12-month pay reference period is set in legislation²³.

In practice this means the 8% minimum is worked out only on the part of somebody's pay that falls between £6,240 and £50,270, not on everything they earn. Somebody earning below £6,240 has no qualifying earnings, so no minimum contribution is calculated for them, while somebody earning above £50,270 has contributions calculated only up to that ceiling. The same band applied in 2025/26, with the lower limit at £6,240 and the upper limit at £50,270¹⁹.

This is separate from the £10,000 trigger for automatic enrolment. The £10,000 figure decides whether you are put in at all; the £6,240 to £50,270 band decides how much the minimum contribution is worked out on.

Tax relief: a £100 contribution costs a basic-rate taxpayer £80

Tax relief is the government's contribution to your pension. If you pay Income Tax at the basic rate of 20%, a £100 contribution into your pension costs you £80²⁴. If you pay Income Tax at the 40% higher rate, a £100 pension contribution costs you £60²⁴. Which? gives the same example from the other direction: making a £60 pension contribution boosts your pot by £100 if you pay the higher rate of 40%⁷.

For many people in a workplace scheme, relief is applied automatically, so the deduction on your payslip is the net amount and the gross amount lands in the pot. Higher-rate taxpayers may need to claim the extra relief themselves, which is why the £60 figure is described as applying to those claiming it themselves²⁴.

This is the arithmetic behind the headline that £100 in your pot can cost you £50 or £60: combined with your employer's contribution, the amount you personally give up is much smaller than the amount that lands in the pension.

Charges on workplace pensions are capped at 0.75%

Pension schemes charge fees, which are taken from your pot rather than billed to you. For the default arrangements of qualifying defined contribution workplace pension schemes, the annual cap is set at 0.75% of funds under management, or an equivalent combination charge⁶. Schemes charge, on average, around 0.3% on pension pots, according to a government consultation²⁵.

Stakeholder pensions, an older type of scheme, have their own limit: managers can charge up to one and a half per cent of your pension fund each year for the first 10 years, and after that up to one per cent²⁶.

Charges compound over time, which is why the cap exists. A young saver's pot has decades to grow, and the difference between a 0.3% charge and a higher one is felt most over long periods. Your scheme's charges must be disclosed to you, and MoneyHelper can help you find them²⁷.

Opting out: the refund window and what you give up

You can choose to opt out of your workplace pension¹⁷. When you are automatically enrolled, your employer has to tell you the start and end dates of the one-month opt-out period¹⁶. If you opt out within that month, the money you have paid is refunded⁵.

After the one-month window, the position changes. Your employer must let you rejoin the scheme at least once a year if you have opted out, and must enrol you back in at least every three years if you are still eligible for automatic enrolment⁵. Separately, some pension contracts carry a cancellation right of 30 calendar days²⁸.

What you give up by opting out is the employer's contribution and the tax relief. The official guidance is also blunt about when opting out may make sense: if you are behind on your mortgage, rent, credit card or other debt payments, a pension might not be the right step now¹⁶. Free, impartial debt advice is available through the debt section's listed charities before you decide.

Your pension stays yours when you change jobs

When you change jobs, your pension belongs to you²⁹. The same point is made in the enrolment guidance: your workplace pension belongs to you, even if you leave your employer in the future¹⁴. You do not lose the pot when you hand in your notice, and you do not have to cash it in.

If your employer is taken over or the scheme changes, your new employer must provide access to a replacement pension that meets or exceeds the government's standards, give you information about the new scheme, and enrol you automatically if you are eligible¹⁵. If you are already enrolled in a workplace pension that meets the government's standards, your employer does not need to enrol you in another workplace pension²¹.

Some benefits are only available to an employer's current workers²⁹, so leaving a job can change what the scheme offers you even though the pot itself stays yours. You may be able to transfer an old pot into a new scheme, but that depends on the schemes involved and should be checked with both providers first.

You cannot usually touch it until 55, rising to 57

Money in a pension is locked away for decades. You cannot usually take money from your pension scheme until you are at least 55, unless you are seriously ill²⁹. The minimum age is going up to 57 from 2028⁷.

This is the trade-off at the heart of pension saving: the tax relief and employer money come with the condition that you cannot get at the pot in an emergency. It is one reason the official guidance says a pension may not be the right step if you are behind on debts¹⁶, and one reason to keep some savings you can reach.

Once you reach the age agreed with your pension provider, you may be able to draw all or some of your lump sum and pension while still working full or part-time for the same employer, depending on the scheme's rules¹⁷. You might also be able to increase the amount you get if you delay your pension¹.

Contributions during sick leave, parental leave and unpaid leave

Pension contributions do not simply stop when your pay changes. If you are getting paid during maternity leave, you and your employer will continue to make pension contributions²¹. The amount you contribute is based on your actual pay during this time, while your employer's contributions are based on the salary you would have received if you were not on leave²⁹.

If you are not getting paid during maternity leave, your employer does not have to make pension contributions unless your contract provides for this²⁹. However, your employer still has to make pension contributions in the first 26 weeks of unpaid leave, and afterwards if it is in your contract²¹. On other unpaid leave, you may be able to make pension contributions if you want to²⁹.

Where statutory payments are involved, the earnings that count can include more than basic pay. Sick pay, overtime payments, bonus payments, arrears of pay and holiday pay are all included if actually received in the set period when statutory maternity pay is worked out³⁰. The having a baby and shared parental leave pages cover the pay rules around leave in more detail.

Pensions and ISAs: saving in both

Nothing in the rules stops you saving into a pension and an ISA at the same time. The two work differently: pension contributions get tax relief and, in a workplace scheme, employer money, but are locked until 55 rising to 57; ISA savings are held in a wrapper that you can access, but without employer contributions. The ISAs section explains the wrapper rules.

One specific product carries a formal warning. Firms offering lifetime ISAs must tell clients that saving in a lifetime ISA instead of enrolling in, or contributing to, a qualifying scheme, occupational pension scheme or personal pension scheme may lose them the benefit of employer contributions, and that their entitlement to means-tested benefits may be affected³¹.

The lifetime ISA bonus is generous on its face: assuming no growth, initial savings of £800 earn a 25% government bonus of £200, giving a pot of £1,000. But withdrawing the entire pot means a government withdrawal charge of £250, leaving £750³². That worked example is why the warning exists: the bonus can be outweighed by the charge if the money is not used for the intended purpose.

Where to get help if something looks wrong

If your payslip or pension does not look right, start with your employer's payroll or HR team, then the pension provider. Beyond that, free help is available. nidirect's guidance on getting information and help about pensions sets out where to ask, and notes that your employer must make contributions²⁷. The Financial Ombudsman Service can handle complaints about pensions organised through employers, and explains what it can and cannot look at³³.

For questions about increasing your workplace or private pension, the official guidance is to speak to a financial adviser¹. MoneyHelper provides free, impartial guidance on pensions and everyday money, and on current accounts and other basics if you are starting from scratch¹². If the problem is debt rather than pensions, free debt advice charities are listed in the debt section.