There are a few reasons why students often end up paying more income tax than they need to - and without even knowing it.
- The most common situation is that when starting a part-time job, employers will often put you on an ‘emergency’ or incorrect tax code (PAYE code) if you don’t give them a copy of your P45 as evidence of your tax code.
- Students who go on a placement year or work part-time during university also often do so over a period that spans two tax years which can confuse things a bit in the eyes of the HMRC (HM Revenue and Customs aka the tax man).
- Most students don’t end up earning over the tax-free personal allowance within a single tax year (which runs April – April), but if you choose to work extra shifts at your part-time job during certain times in the year (over the Christmas holidays, for example) you could be totting up full-time hours.
In this case, the tax man thinks your earning more across the whole year than you are, and will tax you accordingly… but you get it back!
Unless you’re self-employed (in which case you do your own taxes), your employer controls your tax payments to the HMRC.
The tax is deducted from your pay each month as PAYE (pay-as-you-earn) - you’ll be able to see this from your pay slips.
At the end of the tax year, the HMRC will automatically send you a P800 tax calculation, and reimburse you with any tax you’ve overpaid. Therefore, in this case you don’t need to do anything!
However, if you’re a keen bean and don’t want to wait around for your P800 (or you think some of the info on your P800 is incorrect), you can also make a claim yourself at any time of the year using a P50 form.
It’s worth knowing that if you have money in a savings account, the interest you earn on this will also count towards your personal allowance (this doesn’t apply to ISAs – they’re tax free).
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