Rules for Paying Tax and National Insurance as a Student

If you are a student and you work part-time or during the holidays, you may have to pay some income tax and National Insurance contributions.  However, you should also benefit from certain employment rights.

Our guide looks at your rights as an employee and when you should pay tax and National Insurance contributions as a student.

What your employer must do

Even though you may be employed on a temporary, casual or part-time basis, your employer must still fulfil several obligations by law.  These include:

• Deducting income tax and National Insurance contributions from your wages (where appropriate – see below)
• Giving you payslips and a P60 each tax year
• Giving you a P45 when you leave the job

It is against the law for your employer to pay you in cash without deducting tax and National Insurance contributions.  If you do accept cash as payment, you risk losing your employment rights and you could end up having to pay the tax and National Insurance contributions yourself.

Your employment rights

As a student in a part-time, casual or temporary job you have several basic employment rights.  These include:

• Being paid at least the national minimum wage
• Receiving holiday pay
• Benefiting from protection from discrimination

When you don’t pay tax and National Insurance contributions as a student

If you are a student, you will pay tax on your income unless you are a full time student in the UK, you only work in the holidays and you are returning to full time education after the holidays.  In addition, your total income for the tax year must be below the Personal Allowance.

Everyone gets a personal tax-free allowance and the Personal Allowance in tax year 2011/12 is £7,475.  You do not pay any income tax on earnings below this amount.

In order to claim your income with no tax deducted, you should complete the form P38S Student Employees.

In terms of National Insurance contributions, you will pay these if you earn more than £139 per week.  Even if you do one week’s work a year and you earn over £139, you will still pay National Insurance contributions on those earnings.

If you earn below £139 per week you will pay no National Insurance contributions.