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Students and Tax

Did you know that students are required to pay tax in exactly the same way as other UK employees not in education? If not, you're not alone; when quizzed, 67% of students didn't know this either. The following tips may help you to understand more about the tax system.

Tax

  1. Income tax is a tax on income. You will only be taxed on certain types of income and only if the amount is above a certain level.
  2. National Insurance contributions build up your entitlement to claim certain state benefits. The amount you pay depends on how much you earn. You pay National Insurance contributions in addition to income tax.
  3. Tax and National Insurance is deducted from your earnings in the same way as with other workers through a system called PAYE (pay as you earn).
  4. Everybody can earn a certain amount tax-free each tax year (April to April). This is called the Personal Allowance. For the tax year 2017-2018, this is currently £11,500. Students are only entitled to one Personal Allowance in any tax year, even if they have more than one job.
  5. When you start a job, your employer might ask you to complete a Starter Checklist to return to HMRC to ensure you are paying the right level of tax.
  6. If you earn less than the Personal Allowance and have paid some tax, you can claim a refund.
  7. You should receive a P45 form from your employer when you leave a job, which must be given to your next employer. If you are employed on the 5 April, you will be given a P60 which summarises earnings and tax and National Insurance deductions.
  8. When you pay tax, you are allocated a Tax Code which tells your employer how much tax to deduct from your earnings. You can find your tax code on your payslip, P45 or P60. Most students will see either a three digit number followed by a letter (e.g. 1100L) or just the two letters BR (Basic Rate). 1100L means that your full Personal Allowance of £11,500 is taken into account when you are paid.
  9. You will pay National Insurance contributions whenever you earn more than a certain amount per week. Unless an employer has incorrectly deducted National Insurance contributions, you cannot obtain a refund.
  10. You should tell your employer your NINO (National Insurance Number), received at the age of 16, when starting work and quote it when contacting HMRC. Using it correctly will make sure that National Insurance contributions are recorded against your name and will help prevent identity theft.
  11. International students should apply for a NINO by calling the Jobcentre Plus NINO Allocation Service Helpline on 0845 600 0643.
  12. If you have your own business, you need to register with the HMRC within three months. Tax is payable on profit made in excess of the Personal Allowance- a Self Assessment tax return will enable you to calculate this.

The information on this page was correct at the time of publication. For up to date details, please see the Government webpages at www.gov.uk or www.taxguideforstudents.org.uk.