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Opportunity beckons for digital-savvy students

Wednesday 31 July 2019 – One in two students are shunning traditional summer jobs in favour of making money from buying and selling clothes online, according to a recent report.

As they explore more flexible and entrepreneurial ways of making cash, ICAEW - the Institute of Chartered Accountants in England and Wales, reminds students how to maximise their income while making sure they don’t overpay on tax.

For example, there are added incentives to trading online, including a £1,000 tax free trading allowance for miscellaneous trading income that has been available to taxpayers since April 2017. This allowance includes buying and selling on the internet.

Sue Moore, Tax Faculty Technical Manager, explains: “With the hike in university tuition fees coupled with the rise of mobile and e-commerce, it comes as no surprise that students are looking for more innovative ways to raise extra cash. The trading allowance was only introduced two years ago so may still be flying under the radar, but it’s important summer jobbers understand all of the options available to them. It’s a welcome bonus for students who buy and sell goods and services online, as the income is tax-free and doesn’t have to be declared to HRMC.”

However, for those who opt to go down the more traditional route of hospitality or bar work, ICAEW encourages students to keep a close eye on their tax position and has tips on how to claim refunds if they pay too much tax.

Sue continues: “For students taking the traditional route into summer and part-time work, the UK tax system can be complicated to navigate at the best of times. It’s most likely that part-time employees won’t earn enough in a tax year to exceed the tax free personal allowance threshold, but it’s even more likely that students will pay too much tax due to the tax code applied. Crucially, students need to be aware of how much tax they have to pay and how to reclaim it if they pay too much.”

Do you have a summer job during the holidays?

  • You will only have to pay income tax on earnings above the personal allowance - £12,500 for the 2019/20 tax year.
  • For example, if you have a summer job for 10 weeks over the summer holidays that pays £300 a week and this is your only paid work of the year. Your total earnings for the 10 weeks are £3,000 which is under the £12,500 income tax threshold so you should not pay any income tax. PAYE may automatically deduct income tax because you would earn £15,600 a year if you worked all year. Therefore, you would need to reclaim any tax deducted from HM Revenue and Customs (HMRC).
  • £300 a week is over the £166 a week National Insurance Contributions (NIC) threshold so you will pay 12% NIC on the amount in excess of the threshold. You are not entitled to have this amount refunded.

Do you have a part-time job while studying?

  • If you have a part time job while studying and earn less than £166 per week, you do not have to pay any income tax or National Insurance Contributions.
  • However, if you work part time and earn £260 a week, this is over the £166 a week NIC threshold, so you will pay 12% NIC on the £94 a week above the threshold. Your total earnings from the part-time job are £13,520 which is above the £12,500 income tax threshold so you will pay 20% income tax on the £1,020 above the threshold.

Sue also adds: “Not all is lost if your employee deducts more income tax than it should, as it’s fairly straightforward to submit a claim to recover any overpaid tax. When you leave a job, make sure you get a P45 from your employer and pass a copy on to any new employer. Refunds can be claimed on a form P50 when you stop work and don’t plan to work again during the tax year, or by contacting HMRC once the tax year has ended. Claims can be made online through your personal tax account or by phoning HMRC on 0300 200 3300. If all else fails HMRC will calculate the refund automatically after the end of the tax year, but they will send it to the address on their records so you need to make sure that this is kept up to date. And remember you can earn £1,000 via on-line trading on top of the summer job and part-time earnings tax free.”

Media enquiries

Please direct all media inquiries related to this article to:

Tom Mackintosh
Tel: +44 (0) 20 7920 8789
Email: tom.mackintosh@icaew.com