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Student Summer Tax Scares
There is a myth amongst students that you should not be paying taxes. But Is there truth to this myth?
After an academic year, many students will take on a part time job, either to replenish the diminishing (if any) leftovers of the student loan. Or to simply fuel the summer activities.
In most cases, a part time job will be three or four shifts a week, and usually pay the minimum wage. [£5.60 (18+), £7.05 (21+), £7.50 (25+)]
Income tax only has to be paid on yearly earnings over £11,500 (17/18). So if you earn around £250 a week for 10 weeks, you won’t have to pay income tax due to being under the threshold.
However, if you are being taxed, there can be a number of explanations.
Firstly, PAYE may have automatically deducted income tax using those 10 weeks worked as a basis for a year’s earnings.
So, if you are earning £250 a week, over the course of the year you would earn £13,000, thus being over the threshold.
But if wrongly deducted by PAYE, this tax is reclaimable via HMRC.
The National Insurance Contributions (NIC) threshold is currently £157 a week. The payment of NIC is 12% of the excess over the £157.
So for someone earning £250, they would pay £11.16 due to the 12% NIC taken from the excess over the threshold.
Unlike the PAYE assumption, the NIC is not refundable.
A final explanation for why you may find yourself being taxed, could be due to one working a part time job during your time at university.
If weekly you earn less than £157 a week, you will not be deducted income tax or NIC.
But, if you earn over this amount weekly you will be deducted 12% of the excess.
Likewise if you are a full time student, yet are also earning over the personal allowance threshold, you will also pay income tax.
The current income tax rate is 20% on earnings over the threshold.
So, if you find yourself puzzled as to why you’re being taxed as a student, then these reasons should identify the causes.
The theory of students not paying taxes is simply nothing more than… a myth.
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