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Student jobs shouldnt be taxing

Tuesday 7 August 2018, Many students will need to work during their summer holiday to fund their holiday activities and their studies. ICAEW reminds students to keep a close eye on their tax position and how to claim refunds if tax is overpaid.

Caroline Miskin, Tax Faculty Manager explains:

“It is very easy for students to overpay tax. The tax system in the UK can quickly become complicated, particularly if you go on a placement year or work part-time during university. While the majority of part-time employees will earn less than the tax free personal allowance, the tax code applied may mean you pay more than you should. It is important for students to be aware of how much tax they are required to pay, and how to go about claiming a refund should they overpay.”

Do you have a summer job during the holidays?  

  • You will only have to pay income tax on earnings above the personal allowance - £11,850 for the 2018/19 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 £11,850 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 £162 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 £162 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 £162 a week NIC threshold, so you will pay 12% NIC on the £98 a week above the threshold. Your total earnings from the part-time job are £13,520 which is above the £11,850 income tax threshold so you will pay 20% income tax on the £1,670 above the threshold.

Caroline adds: “Don’t panic if your employer deducts more income tax than it should, you can still claim back 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. ”

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Email: emily.parker@icaew.com