As a student you are liable to pay Income Tax and National Insurance in the same way as anyone else.  You don't have any exemption or reduction because of your student status.  The money from Income Tax is used to pay for public spending, such as health and education.  National Insurance is paid to ensure your entitlement to certain benefits, such as a retirement pension.

 

The student loan and grant do not count as taxable income, but if you work during your studies you may have to pay tax and National Insurance, depending on how much you earn. 

 

Personal Allowance and Tax Rates

Everyone is entitled to a Personal Allowance which they can earn without having to pay tax.  The allowance for this tax year (April 2010 to April 2011) is £6,475, which works out at £124.52 per week.  If you do not earn this much then you will not have to pay tax.  Anything above this amount is taxable income and taxed at different rates.  Please visit HM Revenue and Customs for details.

 

If you do have to pay tax then it will be deducted from your wages by your employer.  If you are only going to work for a limited period during one tax year and you know that you will not earn more than the Personal Allowance then you can ask your employer for form P38(S), which you can complete in order to not be taxed on your earnings.

 

Tax Refunds

It is possible that you could end up paying too much tax during the tax year.  This could happen, for example, if you have been working full-time before you come to university and either stop working or cut your hours down when you start.  In this instance your wages would decrease but you would previously have been paying tax as though you were on a full-time wage throughout the tax year.

 

If you think that you might have paid too much tax then you need to ask your employer which tax office they deal with, and contact them some time after the April at the end of the tax year.  The tax office will check whether or not you've paid too much tax and send you a refund if you have.  They may ask you to complete form P50.

 

If you have paid too much tax the tax office will not contact you and tell you.  You need to contact them yourself.

 

 

Working only in the holidays while being a student

If you are a student and you work in the UK only during in the holiday periods (summer, Christmas, Easter) you may be able to receive your wages without tax being deducted. You will need to complete a student exemption Form P38(S) (PDF 43K).

 

To receive your wages without tax being deducted you must:

• be a student who is planning to continue being a student until after 5 April next
• not have a total income from all sources - apart from student loans, scholarships and grants of £6,475 during the 2010-2011 tax year.

 

 

Important Documents

You should make sure that you keep the following documents safe:

• P60 - this is given to you at the end of each tax year and shows how much tax you have paid.
• P45 - you are given this when you stop working for an employer and it shows how much tax you have paid while you have worked for them.

 

 

National Insurance

This is payable if you earn more than £110 per week and is deducted from your wages by your employer.  You pay 11% of your earnings above this amount. 

 

If you are not working it is possible to make voluntary National Insurance contributions of £12.05 per week.   By doing this you protect your National Insurance record and ensure that you receive a full pension when you retire. However check with the Inland Revenue whether this is worthwhile in your case.

 

If you do not have a National Insurance number and need to apply for one then you can click here to find out how to get one.

 

Further information on all of the above is available at the HM Customs and Revenue student tax website.  

 

"The Smart Money initiative at the University of Westminster is part of a national project aiming to improve students' financial capability, led by the Consumer Financial Education Body (CFEB)"