Students: Paying Tax If You Only Work In the Holidays

If you’re a student on a course in the UK, there are different rules for paying tax if you only work during holiday periods.  For example, you may simply work for a few weeks every year in the Christmas, summer and Easter holidays.

If you work during holidays and during term time, you will pay tax in the normal way.

If you do only work in the holidays, you may be able to have your wages paid to you without any tax being deducted.  You do this by completing a form P38(S) – a student exemption form.  Our guide explains when and how students can receive their wages tax-free.

I’m a student. How do I receive my wages without any tax being deducted?

In order to qualify for receiving your wages without any tax being deducted you must:

• Earn less than the ‘personal allowance’ in the current tax year. This is £7,475 for the tax year 2011/12.  Your total income from all sources (apart from scholarships, educational grants and student loans) must be less then this amount
• Be a student and be planning to continue being a student until after the 5^th April next year

If you meet these criteria you should complete a student exemption form (P38(S)) and return this to HM Revenue and Customs (HMRC).

What if I do not meet these criteria?

If you don’t meet the two criteria above, or you are on a non-UK university or college course, you should request a P46 form from your employer.  You will be taxed under the normal Pay as you Earn (PAYE) tax system.

Once HMRC have received the completed P46 form they will:

• Issue you with a tax code.  Your tax code shows your entitlement to any tax allowances (such as the ‘personal allowance’) and any deductions
• Let your employer know what your tax code is.  Your employer can then deduct the correct amount of tax and National Insurance contributions from your wages

What about paying National Insurance contributions?

As a student, you will only pay National Insurance contributions (NICs) if you earn more than £110 a week (or £476 a month).  If you earn less than this amount then no NICs will be payable.

If you earn more than this amount, you will pay National Insurance contributions on any earnings over £110.01 per week, at a rate of 11 per cent.  You will also pay 1 per cent of any earnings over £884 per week.