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Income Tax

Income Tax

Most people pay Income Tax through PAYE, which means that your employer takes Income Tax contributions before they pay you your wages. Income Tax is administered by a government department called HM Revenue and Customs (HMRC).

 For more information about tax for students see:

 https://www.gov.uk/student-jobs-paying-tax

 http://www.litrg.org.uk/useful-links/tax-help-students​  

How much Income Tax will you pay? 

Personal Allowances 

You have a ‘personal tax allowance’ which is the amount of earnings in a tax year on which you do not have to pay income tax. For someone under 65 and with no children, the personal tax allowance for the tax year 6 April 2018 to 5 April 2019 is £11,850.
 

Band Taxable income Tax rate

 
Personal Allowance Up to £11,850 0%
Basic Rate            £11,851 to £46,350 20%
Higher Rate £46,351 to £150,000 40%
Additional Rate over £150,000 45%

For more information on Income Tax, including personal allowances for previous years, check online. You can also estimate your Income Tax for the current tax year and the previous tax year on the gov.uk website.   

Starting work 

When you start a job your employer should ask for ‘new starter information’ (previously called the P46 form). It's a sort of checklist which gives HMRC the information it needs to work out your PAYE code, or tax code. See https://www.gov.uk/tax-codes/what-your-paye-coding-notice-means 

Most young people's tax code will be 1185L, which indicates they are exempt until they earn more than £11,850. 

In each month that you work, your employer should not tax you on any earnings up to the value of one-twelfth of your annual personal tax allowance, which is £987.50 (£11,850 divided by 12). Any monthly earnings above £987.50 should be taxed at 20%. The tax free allowance is cumulative, so for example if you earned £887.50 in April, £100 of your unused tax free allowance would carry forward to May, and be added to the £987.50 tax free allowance for that month, giving you up to £1087.50 tax free earnings. 

Working more than one job at the same time 

If you have more than one job at the same time, only one job should have your full personal tax allowance set against it. When you start another job, you will need to declare this information to your employer as part of their new starter checklist. Normally your employer at the second job will have to take basic rate tax at 20% from all of your wages. 

Try to ensure that your personal allowance (probably 1185L code) is set against your largest source of earnings and basic rate on any secondary sources for earnings. 

Watch for duplication of allowances as this could lead to an underpayment of tax. 

However, if you know that over the whole tax year your total income from all jobs will still be below your personal tax allowance, you can either: 

    • pay Income Tax as you earn and then claim a refund at the end of the tax year (see 'claiming back overpaid tax' below); or 
    • contact HMRC and ask them to split your personal tax allowance between all your jobs 

Leaving work 

When you leave your job, your employer should give you a P45 or ‘leaver form’, which should show your PAYE code, your total earnings and how much tax you paid. This is explained here.

It is important to keep your P45 as you need to give part of it to your new employer, so they know what tax code to put you on. You also need your P45 to reclaim any overpaid tax. 

At the end of each tax year, your employer should give you a P60 form, which shows your total earnings and tax paid in that tax year. Keep your P60 safe as you will need it if you want to reclaim any overpaid tax (see below).  

Claiming back overpaid tax 

The HMRC website now has a student tax checker you can use to check if you have paid too much tax. You will need details of your earnings before and after tax, which you can get from your P60 form, which your enployer will provide you with after the end of the tax year in April.  

You need to wait until the end of the tax year to reclaim any overpaid tax. To do this, you need to contact your employer’s tax office and say why you think you have overpaid. They might have all the information they need or may ask you to send in documents. If you have paid too much tax, you might get a new tax code so any refund will be included with your wages. For more information check here

Claiming refunds for previous tax years 

For previous years, you may be able to claim back any tax you have overpaid if you claim within certain time limits. You can check these time limits online

If you've paid too much tax for previous years, HMRC will send you a P800 Tax Calculation and any refund you may be due by the September after the tax year. You do not need to send them your P60 certificate. 

If you think you are due a repayment and HMRC has not notified you by the September after the tax year then you can telephone or write to tell them why you think you've paid too much tax. 

In most cases you'll get back the tax you've overpaid as long as you claim on time. You can get more information and check the time limits on applying for a repayment of overpaid tax here

Leaving the UK 

If you are leaving the UK and not coming back before the end of the current tax year, and you have paid income tax, complete form P85 before you go, to claim back any overpayment. Download the form and guidance. 

Self-Employment 

If you have student or Tier 4 immigration permission (a “student visa”), your work restriction prohibits you from being self-employed in the UK. You can ignore this section. 

You are self-employed if you run your own business or if you work on a freelance basis. You are also self-employed if you sell goods (including online trading) that you buy with the intention of re-selling them, or if you make items yourself and sell them, intending to make a profit. 

If you are self-employed, you normally need to pay Income Tax and National Insurance Contributions, and fill out a Self-Assessment tax return. You may also need to register for VAT. You need to let HMRC know as soon as you start working for yourself. You can register online, by post or by phone. For information see: https://www.gov.uk/business-tax/self-employed 

The QMUL Careers & Enterprise Centre can also advise on self-employment and starting your own business, and there is information in this guide in the previous section ‘Making your own opportunities’.


Disclaimer:
Law, regulations and policies can change quickly. The information on our website is given in good faith and has been carefully checked but QMUL cannot accept responsibility for any errors or omissions. QMUL is not responsible for the content or reliability of the linked websites which are provided for further information.

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