My first graduate payslip — what are all these deductions and is my tax code right?

Full answer

A first graduate payslip lists gross pay, then several deductions. Income Tax uses PAYE: with the standard tax code 1257L you get £12,570 tax-free, then pay 20% up to £50,270, 40% above that, and 45% over £125,140 (England, Wales and Northern Ireland). Employee National Insurance is 8% on earnings between £12,570 and £50,270, then 2% above. On a £30,000 salary you'd pay roughly £3,486 Income Tax and £1,394 NI across the year. Student Loan repayments only start once you earn over the threshold. Most recent graduates are on Plan 5: 9% on income above £25,000. On £30,000 that's £450 a year (£37.50 monthly). Postgraduate loans add 6% above their own threshold, shown separately. Pension is usually the deduction graduates query most. Under auto-enrolment you contribute around 5% of qualifying earnings, with your employer adding at least 3%. This reduces taxable pay (net-pay arrangement) or attracts tax relief (relief-at-source), so it isn't "lost" money — it's your retirement savings, and it's worth keeping. Check your tax code. 1257L is correct for most people with one job and the full Personal Allowance. Watch for emergency codes like 1257L W1/M1, BR (all pay taxed at 20%, common with a second job), 0T, or a number well below 1257 — these often appear when HMRC hasn't received your starter details, and may mean you're overpaying. Give your employer your P45 or complete the starter checklist; HMRC usually corrects it and refunds any overpayment automatically. Regional note: if you live in Scotland your code starts with S and uses Scottish bands (19% starter, 20% basic, 21% intermediate, then 42% higher). Wales uses a C prefix but rates currently match England. NI matches England and Wales.

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