Starting your first job: what to do about tax
2006-10-15
When you become an employee your employer is responsible for deducting tax and National Insurance from your salary before you receive it.Payslips
Each payday, your employer should give you a payslip. It’s a receipt for the tax you’ve paid, showing details like:
- your earnings before tax (your gross pay)
- Income Tax and National Insurance contributions (NICs) that were deducted from your pay
- your earnings after tax (your net pay)
Notice of coding
When you start work, HMRC sends you a tax code in a 'notice of coding'. They also send it to your employer, who'll use it to work out how much tax to deduct from your pay.
Emergency tax codes
Your employer may use an emergency tax code until HMRC issues the right one. If you've paid too much tax you'll get it back through PAYE.
If you leave your job before you get the right code, or you want to claim tax back for a previous tax year, you can apply to your Tax Office for a refund.
PAYE forms P45, P46 and P60
P45
The form P45 is a record of your pay and tax deductions. You'll get it from your employer when you stop working for them. It shows details like:
- your tax code, tax reference number and Tax Office
- when you were last paid
- your wages so far in the tax year (6 April to the following 5 April)
- how much tax was deducted from your wages
A P45 has four parts. Your employer sends one part to the Tax Office and gives you the other three. When you start a new job, you give two parts to your new employer and keep the other one (called Part 1A) for your own records.
P46
If you're starting your first job and don't have a P45, your employer will give you a P46 to fill in and sign. HMRC will then process your P46 and issue your tax code.
P60
The form P60 is an annual summary of all your payslips. Your employer gives you one at the end of every tax year. You keep your P60 as a record of your pay and the tax that was deducted.
Student loan repayments
If you’ve got a student loan to repay, it’ll happen automatically through PAYE once you start working and earning more than the repayment threshold.
HMRC gives your employer the information they need to deduct the right amount from your wages. Your payslip must show how much has been deducted. If you have any queries about your student loan repayments you can contact your Tax Office – look on your PAYE forms for their details.
Keeping records
What records to keep
Keep the paperwork that contains details about your pay and tax, like:
- payslips and coding notices
- P45 and P60 forms
- details of taxable expenses
- 'benefits in kind' forms from your employer (a benefit in kind is something you get for doing your job that isn't money)
- information about any redundancy award or termination payment you get when your contract ends
- certificates for any 'Taxed Award Schemes'
- notes of any tips or gratuities you get and any other taxable income or benefits that you haven't already recorded somewhere else
- details of any state benefits you've 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 keep records?
You'll need to refer to your records later if you ever need to:
- complete a tax return
- reclaim overpaid tax
- apply for benefits and tax credits
How long to keep them
HMRC suggests you 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.
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