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► Tax
Everyone who earns or receives more income than his or her yearly personal allowance (see below) will pay income tax. Generally, the more you earn, the more tax you pay.
Therefore, we’re sorry to uncover the myth that says students don't pay Income Tax – you do!!! It is true that some students end up not paying any tax during their student years but this is either because they are not engaging in paid work (unlikely these days!), because they do not earn more than their personal allowance in the tax year (see details below about form P38(S) if you think this may apply to you) or because they are working “cash in hand”.
Personal allowances 2010/11
The tax year runs yearly from 6th April to 5th April and with each new year comes a new personal allowance. This is the amount the government sets to mark a point up to which you can earn (or receive income) without paying tax.The basic personal allowance for the 2010/11 tax year is £6,475
This means that tax is only paid on any earnings these amounts. If you plan only to work during the university vacations and you think it unlikely that you will earn more than your personal allowance, it's worth completing form P38.
* Note: there are different allowances for persons aged over 65 and for those registered as blind.
Is all income taxable?
Not all forms of student income are taxable, below is a list of some forms of taxable and non-taxable income as this is NOT an exhaustive list, we would recommend you contact your local tax enquiry centre to check – see below for contact details):
| Non-taxable | Taxable |
| Student loan | Earnings from full or part-time work including tips/bonuses |
| Grants | Any income from self employment |
| Parental contributions | Dividends from shares in a company |
| Most scholarships | Interest from National Savings |
| Housing benefit | Interest from savings with a bank/building society |
| Income from ISAs | |
| Prizes won for academic excellence |
Tax bands 2010/11
The rate of Income Tax you pay depends on how much you earn:
20% basic rate £0 to £37,400 per year
40% higher rate £37,400 to £150,000 per year
50% additional rate £150,000+ per year
The amount you pay in tax may differ slightly from one month (or week) to the next. This is because it is calculated on an “accumulative” basis. This means that the amount you pay is calculated annually but may have adjustments made throughout the year.
Please note, if you have more than one job over the course of the year, we would recommend that you contact the local tax enquiry Centre to check what proportion of your personal allowance has already been used (see contact details below).
Tax rebates & refunds
When you start a new job make sure you give your new employer form P45. If you don’t your employer will have no choice but to give you an emergency tax code “BR” which taxes you at 22% of your earnings. By completing form P46 and/or submitting form P45 your employer will be able to issue you your proper tax code. Any period you have paid tax at the emergency rate should then be rebated (refunded) in your next pay packet. Such rebates should be itemised on your pay slip. If the tax year ends before your employer has given you your proper tax code you should receive a repayment from your tax office. We would recommend that you ring a tax enquiry centre about this).
When you leave a job it is important that you get form P45 from your employer, as you will need this information to take to a new employer to ensure you are not put on an emergency tax code. If you are unlikely to continue working for a period of 4 weeks or more and/or think that you may not use your full personal allowance for the current tax year you may be entitled to a tax rebate. If this applies to you, complete a tax repayment form P50 and return it to your tax office together with parts 2 and 3 of your P45. You should receive a refund within 28 days.
If you think you have paid the wrong amount of tax contact your tax office ask them to check the amount you have paid is correct. If you have paid too much tax, the Tax Office will send you a repayment.
- your national insurance number,
- your PAYE code,
- and your full address.
Understanding tax forms
Form P38(S)
If you think that your total taxable income in the whole year is likely to be less than your personal allowance , and you are only intending to work during the vacations (Christmas, Easter and Summer) you should mention this to your employer when you start work and complete a form P38(S). Your employer should then pay you without deducting tax. Note: completion of this form is not applicable if you’re working during term time.
Form P46
Your employer gives this form when you start your first job. You must sign and return it to the employer. Its purpose is to inform your employer’s tax office that you have started work.
Form P45
Your ex-employer should have given you this when you left your last job. It will tell you your earnings to date, your tax code and the amount of income tax you have paid. You should give it to your new employer or the DWP, if you are signing on as unemployed.
Form P50
This a tax rebate (or refund) form, used if you don't intend to return to work, or are signing on as unemployed (for example, you may enter full-time education). Complete this form out and return it to the Inland Revenue with your P45. A P50 can also be completed during a tax year if there has been a break of at least 4 weeks since you were last employed and you don't anticipate working again during the tax year, in which case HM Customs and Excise may award you a tax refund.
Form P60
Each year your employer should give you a P60, which shows the total amount of tax, and NI deducted from your pay.
Useful addresses
For further information on income tax, contact your local tax office or tax enquiry centre:-
Crown House
11 Regent Hill
Brighton
BN1 3ER
0845 366 7856
If you live outside Brighton, click here to find the Inland Revenue Enquiry Centre closest to you. When you ring it’s a good idea to have the following information to hand:
Your PAYE code
Most employees pay income tax through Pay As You Earn (PAYE) on earnings above their personal allowance. Personal allowance thresholds change with the start of a new tax year, ie. on the 6th April each year. Your PAYE code shows the first three numbers of your total allowance, followed by a letter. For example, if you are a person without children you will normally have a PAYE code of 647L. This means that your tax-free income will be £6475 per year
Important Note: if you are being taxed on a 'BR' code, this means that your employer has put you on an 'emergency tax code' which means you will be paying tax of 22% on all earnings. If this applies to you, we would recommend that you contact the a tax enquiry centre (details below) and read section below on tax rebates.
