Basic Guide to Working and Paying Tax as a Student

Are you a student and working?

If so, you will have to pay income tax and National Insurance contributions if you earn above a certain amount.  Whether you work full or part time, or just during the holidays, you may be liable for tax or National Insurance.

Our guide outlines the basics of paying tax as a student if you’re working in the UK.

Paying tax and National Insurance if you’re working

If you work during term time then any income tax and National Insurance contributions due will be deducted from your wages before you receive them.  You pay these through the Pay as you Earn (PAYE) system.

However, everyone in the UK is entitled to earn a certain amount of money before paying tax.  In the 2011/12 tax year this amount is £7,475.  This is called your ‘personal allowance’.

You are also allowed to earn up to a certain amount each week without paying National Insurance contributions.  In the tax year 2011/12 this amount is £139.

You should only pay tax if you earn above £7,475 each year and you should only pay National Insurance contributions if you earn over £139 per week.

If you change jobs

When you leave an employed position your employer will give you a P45 form.  This tells you how much money you have earned during the current tax year with that employer and how much tax you have paid.

You should keep your P45 safe as you will need to provide this to any future employer.

If you’re self employed

If you are self employed you will have to fill in a self assessment tax return every year.  You should register as self employed with HM Revenue and Customs and you will be advised if you will have to pay any National Insurance contributions.

If you only work in the holidays

If you’re a full-time student and you only work in the holidays, you may not need to pay tax through the PAYE system.  However, you will still pay National Insurance if you earn more than the weekly threshold.

In this situation, you can download or ask your employer for a form P38(S) if all the following apply:

• You are a full time student in the UK and you only work in the holidays
• You are returning to full time education after the holidays
• Your total income for the tax year is below the personal allowance (£7,475 in tax year 2011/12)

If you work during term time (for example in a part time job) then you cannot use form P38(S) just for your holiday job.  Your employer will deal with the paperwork to make sure you do not pay too much income tax.