Working

Tax and National Insurance are legal obligations that people who are employed are required to pay. You should check that you are paying tax and national insurance by checking your payslip. Your employer should be providing you with an itemised payslip detailing your gross pay and any deductions. If you do not receive a payslip this could be a sign that your employer is not registered for tax and national insurance. If this is the case you may not have a legal employment contract and your legal rights can be severely affected. Below is some basic information on tax and National Insurance but if you have any further questions you can contact the Welfare Centre or alternatively you'll find lots of information on the HMRC website.

Do I have to pay income tax?

 

Yes, if you work whilst studying you are still liable for paying income tax on the wages you receive, there is no special exemption for students. Tax is deducted from source via Pay As You Earn (PAYE), this means that your employer makes the deductions from your wage for you. You do not have to complete a tax return or pay Her Majesty’s Revenue and Customs (HMRC) as your employer does this for you. You will normally need to provide your new employer with a p45 (if you have left a previous employment) or a new starter checklist (your new employer will provide this) to register your employment with HMRC and generate your tax code. A normal tax code for someone in only one employment is 944L. If you are not sure about your tax code you can contact HMRC for confirmation.

How much do I have to pay?

 

The amount of tax you pay is dependent on the amount you earn. Each person has a tax free personal allowance of £10,000 and this means you can earn up to this amount without being liable for tax. Any amount above this is taxable at 20%. £10,000 per year equates to £192(approx) per week or £833(approx) per month so if you earn above these amount you can expect to pay tax. Tax is deducted at source based on what you might expect to earn in a year so if you work a complete year then your tax should be correct. If you work for less than a year, i.e over the holidays then you may have overpaid your tax and may be entitled to a tax refund.

How do I reclaim any overpaid tax?

 

If you finish your job and you are still a full time student then you can look to reclaim any overpaid tax by completing a form P50 and returning it along with parts 2 and 3 of your P45. HMRC will work out your overpayment and send you a cheque through the post for the difference. You can download a P50 and get more information on reclaiming overpaid tax via the HMRC website. If you are still working for your employer and you believe you have overpaid tax then you need to contact HMRC who will then investigate to see if you are due a rebate. I thought students didn’t have to pay tax if they only worked during the holidays? From April 2013 employers can no longer use the process of completing a form P38(S) which would exempt students from paying tax over the course of the holiday. All students will pay tax through PAYE as per normal no matter how long they work and you would have to claim any overpaid tax back as discussed above.

What if I have two jobs?

 

For each employment you will have separate tax codes. You will normally receive your personal allowance on your main job and would have a tax code of 1000L and in your supplementary job you would pay tax at 20% on all of that income. If your combined income over the course of the year is less than your personal allowance then you should contact HMRC and discuss spreading your personal allowance across various employers to make sure you don’t pay more tax than you should.

More information

 

You can find lots more information on tax, tax codes and rates and contact details for HMRC through their website.

 

 

What is National Insurance (NI)

You pay NI in order to build up your credits so that you become entitled to benefits, should you require them and also a state pension once you reach the state pension age. It is similar to Income Tax in that it is deducted from your pay by your employer and paid direct to HMRC on your behalf. You will need to have a NI number when you start your employment. This is your personal number that allows HMRC to open your account and make sure all tax and NI contributions are credited to you.

How much NI do I have to pay?

There are different classes of NI contributions which individuals can make but in general if you are employed you will pay Class 1 NI contributions. You pay NI for any week in which you earn over £159. You pay 12% on all income you receive above that amount. Unlike Income Tax, NI is not aggregated across the year and you should only pay for the weeks that you earn above the threshold, this means you should not overpay NI.

I don’t have a National Insurance number

If you live in the UK you should receive your NI number automatically on your 16th birthday. If you are coming to us from outside the UK then you can apply for a NI number by telephoning Jobcentre Plus on: 0845 600 0643 to arrange to get one. Lines are open Monday to Friday 8am to 6pm and are normally less busy before 9am. They may require you to attend an 'Evidence of identity' interview. You must have the right to work in the UK in order to be given a NI card and number. If you are unsure if you have the right to work in the UK we recommend seeking advice from the Welfare Centre.