dmitrinekol
Active member
Not sure how much tax you should be paying and think you could be owed a refund? Our step-by-step guide tells you how to work it out and how to get that all-important tax refund.
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Tax is confusing at the best of times, but when you're a student working a part-time job at uni it can seem even more mind-boggling.
74% of UK students now work part-time while doing a degree, but many don't know how much tax they should be paying and often end up paying too much. Plus, many are unaware that they could be eligible for a student tax refund if they've overpaid – and they're missing out on £100s!
Reclaiming your cash is easier than you might think, and if you've graduated you haven't missed the boat either. We'll show you how you can claim back overpaid tax in April 2020 from as early as 2015/16.
Do students pay tax?
Although you don't have to pay council tax, students studying full-time technically do still have to pay income tax.
However, there are a few details about the way students tend to work while studying that mean they often pay more tax than they need to.
As a result, millions of pounds of income tax overpaid by students is held by the British government. You could be one of the hundreds of students in the UK that has money left unclaimed, and just imagine what you could buy with that!
If you're paid using PAYE (pay as you earn), your income tax will be deducted automatically. Most part-time jobs will pay you this way, and you'll see how much tax you're paying on your payslip.
If you're self-employed or earn income from any other source, you'll have to complete a self-assessment tax return each year to pay your tax.
There are a few reasons why students usually end up paying more income tax than they need to – often without even knowing it.
The most common situation is that, when starting a part-time job, employers might put you on an 'emergency' or incorrect tax code (PAYE code) if you don't give them a copy of your P45 as evidence of what your tax code actually is.
Students who go on a placement year or work part-time during university also often do so over a period that spans two tax years (tax years run from April to April) – this can confuse things a bit in the eyes of HMRC (Her Majesty's Revenue and Customs – a.k.a. The Tax Man).
Most students don't end up earning over the tax-free personal allowance within a single tax year, but if you choose to work extra shifts at your part-time job during certain times of the year (over the Christmas holidays, for example) you could be totting up full-time hours.
This will likely mean that your earnings in that month, if earned every month for a year, would be enough to take you over the tax-free personal allowance and make you eligible to pay income tax.
This is because HMRC will start taxing you as soon as you're earning above the monthly equivalent of the threshold, even if you don't earn another paycheque for the rest of the year. But don't worry – you can get that money back.
Credit: Yevgen Kravchenko, kamui29, Bell Photography 423 – Shutterstock
By law, you can earn up to £12,500 in a tax year without having to pay any tax on it. The majority of students will pay income tax at a rate of 20% on anything earned above that.
The table below shows how much tax you'll pay based on your income:
Income tax bands in England, Northern Ireland and Wales
This also applies to any income you make working abroad for the summer. As you're a UK resident working abroad on a temporary basis, you pay your tax to the UK rather than the country you're working in. It's a good idea to check in with HMRC before heading abroad to work so this is made clear to them.
As well as income tax, you'll pay National Insurance contributions if you earn above £183 a week.
Unfortunately, you can't claim back overpaid National Insurance contributions, but it's worth knowing that all your NI payments go towards things like the NHS and the state pension, so you'll get your money back eventually!
=======================================================================================================
Tax is confusing at the best of times, but when you're a student working a part-time job at uni it can seem even more mind-boggling.
74% of UK students now work part-time while doing a degree, but many don't know how much tax they should be paying and often end up paying too much. Plus, many are unaware that they could be eligible for a student tax refund if they've overpaid – and they're missing out on £100s!
Reclaiming your cash is easier than you might think, and if you've graduated you haven't missed the boat either. We'll show you how you can claim back overpaid tax in April 2020 from as early as 2015/16.
Do students pay tax?
Although you don't have to pay council tax, students studying full-time technically do still have to pay income tax.
However, there are a few details about the way students tend to work while studying that mean they often pay more tax than they need to.
As a result, millions of pounds of income tax overpaid by students is held by the British government. You could be one of the hundreds of students in the UK that has money left unclaimed, and just imagine what you could buy with that!
What is income tax?
In a nutshell, income tax is the tax deducted from your earnings – so that includes any wages from your part-time job.If you're paid using PAYE (pay as you earn), your income tax will be deducted automatically. Most part-time jobs will pay you this way, and you'll see how much tax you're paying on your payslip.
If you're self-employed or earn income from any other source, you'll have to complete a self-assessment tax return each year to pay your tax.
Why students commonly overpay tax
Credit: Pormezz – ShutterstockThere are a few reasons why students usually end up paying more income tax than they need to – often without even knowing it.
The most common situation is that, when starting a part-time job, employers might put you on an 'emergency' or incorrect tax code (PAYE code) if you don't give them a copy of your P45 as evidence of what your tax code actually is.
Students who go on a placement year or work part-time during university also often do so over a period that spans two tax years (tax years run from April to April) – this can confuse things a bit in the eyes of HMRC (Her Majesty's Revenue and Customs – a.k.a. The Tax Man).
Most students don't end up earning over the tax-free personal allowance within a single tax year, but if you choose to work extra shifts at your part-time job during certain times of the year (over the Christmas holidays, for example) you could be totting up full-time hours.
This will likely mean that your earnings in that month, if earned every month for a year, would be enough to take you over the tax-free personal allowance and make you eligible to pay income tax.
This is because HMRC will start taxing you as soon as you're earning above the monthly equivalent of the threshold, even if you don't earn another paycheque for the rest of the year. But don't worry – you can get that money back.
What is the tax-free personal allowance?
Credit: Yevgen Kravchenko, kamui29, Bell Photography 423 – Shutterstock
By law, you can earn up to £12,500 in a tax year without having to pay any tax on it. The majority of students will pay income tax at a rate of 20% on anything earned above that.
The table below shows how much tax you'll pay based on your income:
Income tax bands in England, Northern Ireland and Wales
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| Tax band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | Up to £12,500 | 0% |
| Basic rate | £12,501 to £50,000 | 20% |
| Higher rate | £50,001 to £150,000 | 40% |
| Additional rate | Over £150,000 | 45% |
Income tax bands in Scotland
| Tax band | Taxable income | Tax rate |
|---|---|---|
| Personal allowance | Up to £12,500 | 0% |
| Starter rate | £12,501 to £14,549 | 19% |
| Basic rate | £14,550 to £24,944 | 20% |
| Intermediate rate | £24,945 to £43,430 | 21% |
| Higher rate | £43,431 to £150,000 | 41% |
| Top rate | over £150,000 | 46% |
As well as income tax, you'll pay National Insurance contributions if you earn above £183 a week.
Unfortunately, you can't claim back overpaid National Insurance contributions, but it's worth knowing that all your NI payments go towards things like the NHS and the state pension, so you'll get your money back eventually!
