Nobody's born knowing what a tax code is. If money feels confusing, that's not you being bad with it. It's that nobody taught you. Let's sort that.
In the Youth Voice Census 2026, nearly half of young people (47%) said they hadn't been taught about any of the money topics the survey asked about. At the same time, money is shaping everyday life: 48% are going out less, 45% have cancelled subscriptions and 41% have turned down social invitations because of cost.
So here's the guide school skipped. Your first payslip, tax, pensions, budgeting, saving and borrowing, in plain English.
1. Your first payslip, decoded
| What it says | What it means |
|---|---|
| Gross pay | What you earned before anything comes off |
| Net pay | What actually lands in your bank account |
| Tax code | Tells your employer how much tax-free pay you get. For most people it's 1257L. |
| PAYE or Income Tax | Tax taken automatically from your wages |
| NI or National Insurance | Pays towards things like the NHS and your future State Pension |
| Pension | Money going into your workplace pension (your employer adds to it too) |
| NI number | Your personal reference. Check it's right. |
About 1 in 5 young workers say they don't understand their payslip. If that's you, ask your manager or whoever runs payroll to walk you through it once. It's a completely normal question.
2. Tax and National Insurance, the short version
- You can earn £12,570 a year tax-free. That's your Personal Allowance.
- Above that, you pay 20% Income Tax on the extra (up to £50,270)
- You pay 8% National Insurance on earnings above roughly £242 a week
Worked example: you're 18, working 37.5 hours a week on £10.85 an hour. That's about £21,150 a year, or £1,763 a month before deductions. Around £143 goes in tax and £57 in National Insurance, so you take home about £1,560 a month before any pension.
Check your tax code. If it ends in W1, M1 or X, or it's 0T or BR, you might be on an emergency code and paying too much tax. It's common in first jobs and when you have two jobs. Contact HMRC or use your Personal Tax Account online to fix it, and you'll get the overpayment back.
P45 and P60: a P45 is what you get when you leave a job (give it to your next employer). A P60 is your end-of-year summary. Keep both.
3. Know what you should be paid
Minimum hourly rates from 1 April 2026:
- Under 18, and apprentices under 19 or in their first year: £8.00
- Aged 18 to 20: £10.85
- Aged 21 and over: £12.71
You also get at least 5.6 weeks' paid holiday a year (pro rata if you're part-time). If your pay looks wrong, raise it with your employer first, then call Acas if it isn't sorted.
4. Pensions: free money you shouldn't ignore
Feels a lifetime away, we know. But here's why it matters now:
- If you're 22 or over and earn more than £10,000 a year, you're enrolled automatically. You pay in, and your employer has to pay in too (at least 3%).
- If you're under 22, you can usually ask to join. If you earn over £6,240 a year, your employer must contribute as well.
- Opting out means turning down part of your pay package.
Money you put in at 18 has decades to grow. Small amounts early beat big amounts later.
5. A budget you'll actually stick to
Forget spreadsheets if they're not your thing. Try three pots:
- Needs (about 50%): rent or board, travel, phone, food, bills
- Wants (about 30%): going out, clothes, subscriptions, takeaways
- Future you (about 20%): savings and paying off anything you owe
The percentages are a guide, not a rule. If you're on an apprentice wage and paying for travel, needs might be 70%. That's fine. The point is knowing where it goes.
Make it easy:
- Set up a separate account or pot for bills and move the money on payday
- Check your subscriptions every three months. Cancel what you've forgotten about.
- Give yourself a weekly spending amount rather than a monthly one. It's much easier to manage.
- If you live at home and pay board, agree the amount clearly. It's good practice for rent.
6. Saving, even when there's not much left
- Start with a buffer. Aim for £100, then £500, then one month of costs. That's what stops a broken phone turning into debt.
- Automate it. £10 on payday that you never see beats £50 you mean to move “at some point”.
- Look at a Lifetime ISA if you're 18 or over and saving for a first home. You can save up to £4,000 a year and the government adds 25%. There are penalties for taking it out for anything else, so check the rules first.
- On Universal Credit? Look up Help to Save, which pays a bonus on your savings.
7. Borrowing without the hangover
- Buy now, pay later is still debt. It's easy to stack up several at once and lose track. If you wouldn't buy it with the money in your account, pause.
- Overdrafts are for emergencies, and most charge high interest once you're past any free buffer
- Credit cards can build your credit score if you pay them off in full every month. If you can't, they get expensive fast.
- Student loans work differently. You repay 9% of what you earn above £25,000, straight from your wages, and it doesn't appear on your credit file.
Your credit score: it matters when you want a phone contract, a car on finance or a flat. Build it by registering to vote, paying bills on time and keeping old accounts open.
Never let anyone move money through your bank account, even for a cut, even if it's a mate. That's being a “money mule”. It's a crime, and it can get your account closed and wreck your credit for years.
8. If money's getting on top of you
It happens, and it's more common than people let on. In the census, 14% of young people said they can't afford their essential living costs. If that's you:
- Talk to someone early. Problems with money shrink when you look at them and grow when you don't.
- Free, confidential help: StepChange, Citizens Advice, National Debtline and MoneyHelper
- Tell your employer or college if travel or kit costs are stopping you getting to work or study. There's often support nobody's mentioned.
Your money skills checklist
Money skills also come up in asking for a pay rise. In the census, 58% of young workers didn't feel confident asking. Knowing your numbers is where that confidence starts.
Where inyourroots® comes in
Earning well starts with finding work that fits. inyourroots® is a strengths-first career discovery experience for 16 to 25 year olds. Budi, your career companion, helps you spot your strengths, build real-world skills and connect with local employers across Essex, Suffolk and Hertfordshire.
Find work that fits you. Join the waitlist at inyourroots.com
This is general information for the 2026/27 tax year in England, not financial advice. Rates and rules change, so check GOV.UK and MoneyHelper.