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HMRC offers TaxationWeb’s student community some guidance on paying the right amount of tax when they have a job, and on how to reclaim tax which has been overpaid.

Introduction

You probably think that tax is a bit dull. And you’re probably right. But it is less dull when you realise that there is money to be saved by completing a simple form or by making a claim if you have paid too much tax.

If you're a student and have a job, you have to pay Income Tax and National Insurance like everyone else - but only if you earn over a certain amount.

Working in term time

If you work for an employer during term time, any Income Tax and National Insurance due will be deducted from your wages before you receive them. This is known as Pay As You Earn (PAYE). However, everybody has a tax free Personal Allowance of £6,475 for the tax year 2009-2010, before they start paying Income Tax.  You only have to pay National Insurance contributions if you earn above £110 a week. [ But there's no NIC if you're under 16 - Ed. ]

When you leave a PAYE job, your employer will give you a form P45. You'll need to give it to your next employer as soon as you start your new job - to make sure you don't pay too much tax in the future.

Holiday jobs

If you're a full-time student with a holiday job however, and your total income for the year is below the Personal Allowance, you may not need to pay tax at all instead of claiming it back later. If this applies to you, ask your employer to complete a Form P38(S) instead of a P46 when you start the holiday job ( see - Student Employees ). 
 
To receive your wages without tax being deducted using the P38(S) you must:

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

If you do not meet the conditions for P38(S) your employer will ask you to sign one of the statements on form P46 (or you can hand in a form P45(3) from an earlier job). Your employer will then tax you under PAYE. Once HMRC have received the form P46 or P45(3) from your employer, they will issue you and your employer with a revised tax code if you are entitled to a different level of allowances or deductions.

Claiming back overpaid tax

If you think you've paid too much income tax, use the Student Tax Checker to find out if you are due a refund. You can take some simple steps to find out if you are eligible to apply for a repayment.

You may have paid too much tax if:

• you started a new job and have been given a temporary standard tax code
• your employer was using the wrong tax code 
• you were only employed for part of the year 
• you're a student who only worked at holiday times and didn't complete form P38(S)
• you had more than one job at the same time 
• you stopped working and didn't get any taxable earnings or benefits for the rest of the year 

How to claim a repayment

Write to your Tax Office and include any relevant documents (for example, any forms that your employer has given you and information about your employment and benefit history) about your earnings during the tax year for which you're claiming. They will look into your query, and if you have overpaid, will work out how much they owe you and send you a refund in the post.

You have five years from 31 January following the end of the tax year to claim it back. For most students this time limit will change to four years from the end of the tax year from 1 April 2012. See details at:  How to Reclaim PAYE Overpayments - Previous Years.

Further Links

• See Tax Advice for Students
• See Beginner's Guide to Tax

Useful Bits

• You can earn up to £6,475 before you start paying tax
• Ask your employer for a P38(S) – and you may not have to pay tax during the holidays
• Look at the Student Tax Checker to see if you are due a refund