Starting a new job guide

This guide to financial considerations for starting a job will explain the key features of bank accounts, credit cards, insurance products and protection that you might need as you progress in your new career, as well as some tips for preparing your finances for starting a new job.

Tax and national insurance

As you start earning money, you’ll have to pay the government some of it in the form of tax and national insurance (NI). Your employer will ask you for your NI number before you start; national insurance is subtracted from your income and pays for any State benefits you may take later in life.

When starting a new job, make sure that you fill out a P46 (if this is your first job) or a P45 (from your old employer if you are switching jobs), so that your tax is calculated correctly. If you are put on emergency tax, you can claim back anything that you shouldn’t have paid by contacting the HRMC.

Student loans

On top of tax and national insurance, student loan payments will kick in when you begin to earn over a certain threshold. Repayment will total 9% of your earnings over this threshold. Our student finance guide has more information on repaying student loans.

Banking

Most companies pay their employees by BACS transfer, which means that before starting a job you’ll have to have a bank account open for you salary to be paid into. Now that you’re earning money, it’s worth taking another look at your bank account and seeing whether it still meets your needs. Formulating a budget around one or several accounts is the best way of managing your spending and saving.

Current accounts

If you are starting a new job after university then you will probably already have a student account. It’s worth looking at the graduate accounts available however, as these will offer an interest free overdraft that can be helpful to avoid incurring costs before your first paycheck. They also gradually reduce the overdraft facility to help you get out of debt.

You’ll probably just want easy access to the money that you’re earning, so a standard current account should meet your needs if you can’t get a graduate account. To find out more about current accounts, take a look at our current account guide.

Savings accounts

Saving money is always a good idea, and having the money to tide you over if you lose your job unexpectedly or to cover any large, unexpected spending is extremely helpful.

Savings accounts are an easy way of managing your money, letting it accumulate more interest than a current account. There are several types of savings account, but if you want flexibility with your money then an instant access account is the best way forward - you can even arrange regular payments out of your salary into a savings account. There’s lots more information on the different ways of saving in our savings account guide.

Credit cards

You may also want to consider applying for a credit card, as they can be an effective way to manage your money, if used correctly. Credit cards will give you a certain amount of credit to spend each month, and do not require you to pay back the full amount every time. A card with low purchase rates (meaning that there is little to no interest paid when you buy something on your card), is a good benefit for those starting a job, as it means that large purchases can be made with no interest being charged. Furthermore, several cards will add extra incentives, such as airmiles, cashback or shopping rewards, that can provide an extra boost to your income. Cards with low interest rates on balance transfers are a good way of managing any debt that you may have incurred before starting your job.

Be careful though, and don’t overspend on a credit card- budgeting correctly will ensure that you don’t end up in trouble. If you’re thinking about getting a credit card, take a look at our guide first.

General insurance

As you accumulate more expensive possessions, insurance will become more of a factor in your life. Thinking about cover if disaster strikes should be a priority as a starter income may not pay enough for you to replace your belongings. The insurance section of our website has more details on the plethora of different policies available.

Home contents insurance

Starting a new job may mean moving, or possibly having to find your own home for the first time. Even if you are a graduate, your living arrangements are likely to differ from your student digs. If you are renting a flat or house, consider home contents insurance for your possessions. This will cover you if your belongings are damaged or stolen, and can be very helpful as the net worth of your estate increases.

Remember to update your cover as you buy new things, however. An expensive new television could risk invalidating your policy if you don’t notify your insurers.

Alternative accommodation cover

Moving to a new location without any safety net and having to cope on your own can be stressful. Alternative accommodation cover offers some piece of mind by covering the cost if you have to temporarily move home, for instance if disaster means that you can’t stay in your flat or house.

Car insurance

If you have to drive to work, or decide to buy a car with your new income, then re-evaluating the level of car insurance that you have is a must If you’re not reliant on your car to get to work, basic cover may be enough. If you need it for commuting, look at the features and likewise, you may need more comprehensive cover if you have a nicer car.If you want to compare motor insurance deals, take a look at our Star Ratings. They are an easy indication of how much cover each policy offers, and can be an excellent indication of what level of insurance is right for you.

Other insurance

Home contents insurance and car insurance are the types of insurance that are probably most important to people starting a job. However, several other types of insurance may still be useful. If you are buying a house then buildings insurance is a necessity, whilst you might want to consider pet insurance if you get a cat or a dog. Mobile phone insurance may be helpful if you splash out on a new handset and want to ensure that it will be replaced if it is lost, stolen or damaged

Pensions

It might seem early to be thinking about retirement, but if you consider that a £100,000 pension fund accumulated when you retire will only afford an income of around £5-8,000 a year, the need to start building a pension early is obvious.

Any company you work for will have to offer a pension scheme, and these represent a great, simple way of saving for the future. As your pay increases, however, it is a good idea to start building up savings with a personal pension scheme. Pensions vary significantly in how they work, so learning more is a good idea before you invest. Our guide to pensions is a good starting point.

Income protection

As your bills increase and you have more people to look after, the financial implication of losing your job will increase. Income protection is a way of securing yourself if disaster strikes and you can no longer afford your rent, mortgage payments or other bills as a result of accident, illness or occasionally redundancy.

Short term income protection will cover you for a limited length of time if illness (or sometimes redundancy) strikes. It offers a percentage of your income as cover whilst you find another job or recover. Long term income protection is specifically for cover against illness, but has an unlimited term of payment. You can find out more on both of them by reading our income protection guide.

Payment protection (PPI) covers the cost of a particular bill or debt, and so will insure if you can no longer afford mortgage or loan repayments. As such it is quite specific and may not be needed. The key details of PPI are covered in our PPI guide.

Top tips for starting a new job

• Don’t pay too much tax; fill out the right forms as soon as you start. If you do end up on emergency tax, contact your local tax office for a rebate.
• Make a budget, based on your monthly earnings (after tax), bills and rent.
• Set up a savings account and pay a proportion of you wage into it every month, if you are able to do so.
• Make sure that you have the right level of insurance cover for your home contents, car, income and other areas.
• Keep pensions in mind, and consider your employer’s pension policy.
• Once you have dependents and large bills, you may want income protection as a failsafe. 

Starting a job can be an exciting period of your life but the financial responsibilities which accompany employment can be daunting. These are a few of the financial products that can make life easier, both now and in the future. This guide to starting a job should help you to keep on top of your finances and make the right decisions now, to benefit you in the short and long term.

If you’re looking to get on the housing ladder or thinking of getting married, our guides to buying a house and getting married may be very useful.