Understanding your first graduate payslipFind a job
Understanding your first graduate payslip can be vital for budgeting your expenses and other living costs. While it's important to enjoy the money you've worked for, there's also a few heartbreaking truth to consider before you start spending with reckless abandon.
Make sure you're aware of these to better understand just how much money you've got at your disposal.
Heartbreaking Truth #1: Taxes
With the move from university into the working world comes the unpleasant realisation that you have now entered the world of the taxpayer.
You will see several deductions listed on your payslip:
- Income Tax: this is worked out according to how much you earn.
- National Insurance: this is calculated at 12% on earnings between £153 and £805 per week. Anything over £805 will face a further 2% deduction per week.*
* These numbers are for students who started university after 2012.
Put in Practice
You've got your first graduate job and have been informed you will be paid a flat salary of £24,000 per year. Congratulations! Here's what your deductions will look like:
- Gross monthly Pay: £2,000
- National Insurance: -£160.44
- Income Tax: -£233.33
- Student Loan: -£22.50
- Net Pay: £1,583.73
Heartbreaking Truth #2: Student Loans
Remember all that money you were given to learn and live at university? It's time to start paying it back. Presuming you started after 2012, your student loans will be deducted from earnings over £21,000 at a rate of 9%.
Put in Practice
- £24,000 - £21,000 = £3,000
- Repayments are taken at a rate of 9% from the amount over the £21,000 threshold, in this case £3,000.
- 9% of £3,000 leaves a yearly repayment of £270, and a monthly repayment of £22.50.
As your salary grows, so will the amount of your repayment. Luckily the payment is deducted directly off your pay so it will be gone before you even notice it.
For more information on paying off your student loan, take a look at our Graduate Guide to Student Loans.
Heartbreaking Truth #3: It Only Comes Once a Month
Moving from living off your Student Loan to budgeting month-to-month is difficult, and it will take you a little while to adjust.
You will have more expenses now than you did at university.
A big reason for this is that you will likely have more expenses now than you did at university. Monthly travel, three meals a day, work clothes, dry cleaning, shoe polish, and toiletries are all expenses that you may be incurring now that you are in the working world, not to mention the activities you will likely be paying for to help you unwind on the weekends, whether it's a shamefully large bill at the pub or a new yoga class.
So as tempting as it is to blow your first pay on a shopping spree or a celebratory night out, you have to make it last. Try and stretch the cash until you have yourself settled.