Your First Job After University: Tax, NI and Student Loan in 2026

Starting your first proper job after university is exciting — until you look at your first payslip and realise that the salary you negotiated looks nothing like the amount landing in your bank account. For most 2025 and 2026 graduates, a £26,000 salary does not mean £26,000 a year to spend. Income tax, National Insurance, and a student loan repayment all come out before the number reaches you.

This guide explains every deduction on your first payslip, how to avoid being overtaxed from day one, what the Plan 5 student loan threshold means for you, how pension auto-enrolment works, and why starting salary sacrifice from your very first month is one of the best financial moves you can make. There is also a full worked example showing exactly what a £26,000 graduate earns after all deductions in 2026/27.

Day One: Emergency Tax and the Starter Checklist

Before your first payday, your employer needs to know your tax code. The tax code tells their payroll system how much income tax to deduct. If they do not have your tax code from HMRC, they will use one of the following defaults:

1257L W1/M1 — This is the most favourable default. It applies the full personal allowance (£12,570) but on a week-1 or month-1 basis, meaning it does not accumulate. You will broadly pay the right amount of tax if your income is straightforward.

0T — This is the emergency tax code that applies the zero personal allowance. Every penny of your salary is taxed at 20% (or higher if you earn a lot). This is what happens if you fail to complete the P45/Starter Checklist process correctly.

How to Avoid the 0T Code

Your previous employer issues a P45 when you leave. If you come straight from university, you will not have a P45. In that case, you must complete a Starter Checklist (previously called a P46) for your new employer. This is a simple form — often completed online — where you confirm:

• This is your only job
• You have not been receiving any state benefits or other income in this tax year

If you tick the right boxes, your employer uses code 1257L W1/M1 and you pay approximately the right tax from the start. If you forget to complete it or complete it incorrectly, you risk the 0T code, which overtaxes you. You can still recover overpaid tax — HMRC will reconcile it — but it is better to get it right from the start.

If you have worked earlier in the tax year (perhaps a summer job before graduation), your P45 from that job should go to your new employer. They can use it to update your cumulative tax position.

PAYE Explained: Reading Your First Payslip

PAYE (Pay As You Earn) is the system by which your employer deducts income tax and National Insurance before paying you. Your payslip should show:

• Gross pay — your full salary before any deductions
• Income tax — calculated from your tax code and year-to-date earnings
• National Insurance (employee) — 8% on earnings between £12,570 and £50,270, 2% above
• Student loan repayment — if applicable (see below)
• Pension contribution — if you are enrolled (see below)
• Net pay — what you actually receive

Your tax code should appear on your payslip. If it shows 0T, contact your employer's payroll department immediately and complete the Starter Checklist.

Income Tax Thresholds in 2026/27

• Personal allowance: £12,570 (no tax below this)
• Basic rate (20%): £12,571 to £50,270
• Higher rate (40%): above £50,270

Most recent graduates will be in the basic rate band for the foreseeable future.

National Insurance in 2026/27

• No NI below £12,570 per year (same as the personal allowance — a deliberate alignment)
• 8% on earnings between £12,570 and £50,270
• 2% on earnings above £50,270

The NI threshold alignment with the personal allowance means that you start paying both income tax and NI at roughly the same point.

Plan 5 Student Loan Repayments

Graduates who started their undergraduate course in England from autumn 2023 onwards are on Plan 5 student loans. This is the post-Augar reform plan with the following key terms (2025/26 and 2026/27):

• Repayment threshold: £25,000 per year (£2,083/month)
• Repayment rate: 9% of earnings above the threshold
• Write-off period: 40 years from the April after graduation

If you graduated in 2025 or 2026, you are almost certainly on Plan 5.

How the Repayment Calculates

9% applies to gross earnings above £25,000. On a £26,000 salary:

• Earnings above threshold: £26,000 − £25,000 = £1,000
• Monthly repayment: 9% × (£1,000 ÷ 12) = £7.50 per month

This is a very small repayment at £26,000. As your salary rises, the repayment grows:

Important: Student loan repayments are collected through PAYE, like income tax. You do not need to do anything — your employer deducts it automatically once they have been notified. HMRC notifies employers of loan repayment obligations when you have been assessed as having a qualifying loan.

Plan 1, 2, and 4 — If You Graduated Earlier

• Plan 1: Started before September 2012 (England/Wales). Threshold £24,990, repayment 9%.
• Plan 2: Started September 2012–2022 (England/Wales). Threshold £27,295, repayment 9%, 30-year write-off.
• Plan 4: Scottish students. Threshold £31,395, repayment 9%.

If you are unsure which plan you are on, log in to the Student Loans Company portal at studentloanrepayment.co.uk.

Auto-Enrolment: Pension From Day One

Under UK auto-enrolment legislation, your employer must automatically enrol you into a workplace pension if:

• You are aged 22 or over, and
• You earn more than £10,000 per year in that employment

If you earn between £6,240 and £10,000, you have the right to opt in but are not automatically enrolled. Below £6,240, no auto-enrolment applies.

Minimum contribution rates under auto-enrolment:

• Employee: 5% of qualifying earnings (earnings between £6,240 and £50,270)
• Employer: 3% of qualifying earnings (making a combined 8% minimum)

You can opt out within one month of being enrolled. If you do opt out, you will be re-enrolled every three years. Opting out gives you slightly more take-home pay now but means you also lose your employer's 3% contribution — which is effectively a pay cut of 3%.

Why Starting Salary Sacrifice Early Is Valuable

Many employers offer salary sacrifice for pension contributions rather than ordinary deductions. Under salary sacrifice:

1. Your gross salary is contractually reduced by the pension contribution amount.
2. You pay income tax and National Insurance on the lower (reduced) salary.
3. Your employer pays into your pension on your behalf.

For a graduate on £26,000 contributing 5% (£1,300/year) to a pension:

Standard PAYE pension contribution:

• Tax relief at source: £1,300 goes in, you claim 20% tax relief, pension pot gets £1,625 (basic rate top-up)
• NI: you still pay NI on the full £26,000

Salary sacrifice:

• Your taxable salary reduces to £24,700
• You save NI at 8% on the £1,300 sacrificed = £104/year in your pocket
• Your employer also saves 15% NI on £1,300 = £195. Many employers pass some or all of this saving back to employees as additional pension contributions.

The NI saving via salary sacrifice on a £26,000 salary is modest (£104) but compounds meaningfully over a career.

P60: Your End-of-Year Summary

In April of each year, your employer issues a P60 — a statement of total earnings and total deductions for the completed tax year. Keep every P60 you receive; they are useful for:

• Checking you have not overpaid tax (HMRC reconciliation)
• Completing a self-assessment tax return if required
• Mortgage applications (proof of income)
• Benefit applications
• Pension tracing in later life

If you think you have overpaid income tax during the year (e.g., due to an incorrect tax code in early months), HMRC will typically send a P800 tax calculation after the tax year ends and issue a refund automatically. You can also check via your Personal Tax Account at gov.uk.

When You Need to Complete a Self-Assessment Return

Most PAYE employees never need to complete a self-assessment return. You will need one if, in the tax year in question, you:

• Have income from employment over £100,000 (the personal allowance taper triggers)
• Have untaxed income of more than £1,000 (e.g., freelance work, rental income)
• Have income from savings or investments above the tax-free allowances
• Owe the High Income Child Benefit Charge
• Are a partner in a partnership
• Are self-employed with trading income above £1,000

As a straightforward graduate with one PAYE job and no side income, you almost certainly do not need to complete self-assessment.

Worked Example: £26,000 Graduate Salary — 2026/27 Take-Home

Assumptions:

• Graduate, Plan 5 student loan, started after April 2026 repayment start
• Standard personal allowance (£12,570)
• Workplace pension: 5% employee contribution via salary sacrifice
• No other deductions

Gross salary: £26,000

Salary sacrifice pension contribution (5% of £26,000): −£1,300 Adjusted gross for tax/NI purposes: £24,700

Income tax: Taxable income: £24,700 − £12,570 = £12,130 Tax at 20%: £12,130 × 20% = £2,426

National Insurance (employee): NI on earnings between £12,570 and £24,700: £12,130 × 8% = £970

Student loan (Plan 5): Earnings above £25,000 threshold = £26,000 − £25,000 = £1,000 Annual repayment: 9% × £1,000 = £90

Net take-home calculation:

Plus: pension pot receives £1,300 (employee) + £780 employer (3%) = £2,080/year.

Without salary sacrifice and without a pension contribution, take-home would be slightly higher in cash (approximately £21,654/year, or £1,805/month), but with no pension pot growth and no NI saving.

For your own salary, use our take-home pay calculator to model your exact position including student loan plan and pension contributions.

Key Takeaways

• Complete your employer's Starter Checklist from day one to avoid the 0T emergency tax code, which overtaxes you until corrected.
• Plan 5 student loan repayments start at 9% of earnings above £25,000 — on a £26,000 salary this is just £7.50/month.
• Auto-enrolment kicks in at age 22 and £10,000 earnings; opting out means losing your employer's 3% contribution.
• Salary sacrifice pension contributions save you NI (8% at basic rate) and may generate additional employer contributions.
• You only need to complete a self-assessment return if your income exceeds £100,000, you have untaxed income over £1,000, or you have other qualifying income — most graduates do not.