PAYE is the system employers use to deduct Income Tax and usually employee National Insurance from wages before paying you.
Wrong starter details or tax codes can produce too much or too little tax. National Insurance uses pay-period thresholds, so it is not simply annual tax with another name.
The useful points
- The standard Personal Allowance is £12,570 in 2026–27, but income and circumstances can change it.
- For England and Northern Ireland, taxable income after allowances normally enters 20%, 40% and 45% bands; Scotland has different income-tax bands.
- Your tax code tells payroll what allowance or adjustment to use.
- Benefits, two jobs and earlier pay can affect the calculation.
Why marginal tax is not tax on the whole salary
Income-tax bands apply to slices of taxable income. Moving into a higher band does not normally cause every pound already earned to be taxed at the higher rate. National Insurance has its own thresholds and is calculated through payroll, so it should not be combined mentally with Income Tax as one flat percentage.
- Distinguish gross income, taxable income and take-home pay.
- Use the rules for the correct tax year and UK nation.
- Understand that a pay rise normally still increases net income even when part enters a higher band.
Handle second jobs, emergency codes and refunds
A second employer may not have the correct allowance information, and a first payslip can use a temporary code. That does not automatically mean the employer made a mistake. Check the HMRC account, provide the correct starter information and keep evidence rather than asking payroll to invent a code.
- Do not use the Personal Allowance twice across two jobs.
- Check cumulative versus week-one or month-one treatment.
- Contact HMRC when the code is wrong; contact payroll when the code has not been applied.
A suspicious first payslip
Priya starts her first job and sees a tax code ending in W1/M1. She compares it with her HMRC account and contacts payroll rather than assuming it will fix itself.
What this means for you
Use the same steps with your own figures. Change one assumption at a time and check that essentials still fit before committing.
Common traps
- Assuming all deductions are based on annual salary in the same way
- Ignoring HMRC notices
- Using last year's bands for a new tax year
A realistic action list
- Read the tax code
- Keep P45 or starter information
- Compare deductions using the official HMRC service