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Five things students need to know about tax

Students are unfortunately not exempt from tax. You might even face more complicated situations than many other people, due to working part-time or changing jobs. Get the facts on tax here…

With that in mind, we asked Tax Guide for Students (TGFS) for their top five tax pointers...

For more student money advice, see our guides to finding part-time work and how to survive on a student loan

1. Working and studying – check your tax code 

Many students get a job at some point – whether it's during term-time, the holidays or as part of a sandwich course.

You will be given a PAYE (Pay As You Earn) tax code from HM Revenue & Customs (HMRC) which your employer uses to work out how much tax to take off your wages. You will only ultimately owe tax if you earn over your personal allowance - £11,000 for the 2016/17 tax year, which runs from 6 April 2016 to 5 April 2017. But if your PAYE code is wrong, you could pay too much tax.

Tip: find out more from the TGFS website on understanding your payslips and checking your tax code. Check your tax when you first get a job, then keep your eye on it, especially if you switch jobs or get a second job.

2. Claiming a tax refund

As well as keeping an eye on your weekly or monthly payslips, check your tax at the end of the year. Paperwork you'll need includes:
  • P60s – from your employer (one for each job), which show your year’s earnings and the tax taken off. You will receive this by 31 May following the end of the tax year.
  • P45s – if you left a job during the year, your former employer should have given you a P45 when you left.
  • Add up your earnings from all jobs. If you earned less than your personal allowance but paid tax, contact HMRC to claim a refund. The Which? guide to tax rebates shows you how to do this. 
Tip: let HMRC know if you change address so they can send documentation and any tax refund cheques to the right place. You can do this online.

3. What is National Insurance?

Students are often shocked when National Insurance contributions (NIC) are taken off their wages, even when they haven’t paid any tax. NIC is calculated per pay period and not over a tax year, so you can’t do the trick of adding up your earnings at the end of the year and claiming a refund as you can for tax.

Instead, your employer deducts NIC if you earn more than £155 per week or £671 a month (for the 2016/17 tax year). You might notice increased NIC deductions if you work extra hours, or work full time during the holidays. 

Tip: always give your employer your National Insurance number when you start a job, so that HMRC record your contributions. They may be important if you need to claim state benefits in the future. 

4. Council tax

Many students assume they won't need to pay council tax. However, council tax applies to the household, so it depends on not only your own situation but also that of your housemates. If you are renting a property you'll need to check the lease agreement to see who is responsible for paying council tax.

Factors affecting council tax include: 
  • whether you and your housemates are full-time or part-time students, and where you live. 
  • For England and Wales, generally if everyone is a student, your household will be exempt from council tax. The tax rules are slightly different in Northern Ireland and Scotland.
Tip: watch out if the circumstances of one of your household changes, for example one of your housemates leaves their course. Council tax may then apply.

5. Volunteering and training

Students often do voluntary work or internships to gain work experience. Various job titles may be used for the work you are doing, but try to understand whether you are classed as an employee or a volunteer. This affects what tax you may or may not have to pay. This can be complicated, so take a look at our guide on the TGFS website.

Tip: if you are being employed during an internship, you are entitled to the National Minimum Wage. 

Which? University provides guest spots to external contributors. This is from Tax Guide for Students, an HMRC and Chartered Institute of Taxation (CIOT) funded website designed to help students and their advisers with their tax affairs. 


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