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Everyone who works in the UK including home, EEA and International students is liable to pay National Insurance and Income Tax. The amount that you have to pay will depend on how much you earn. A National Insurance number or tax code does not give you permission to work. If you are an international student then you must check that the stamp in your passport gives you permission to work. For further advice please see The Student Advice Centre.
National Insurance is a government scheme where contributions paid by those in employment provide benefits for those who cannot work when sick, unemployed or retired.
Your employer will deduct your National Insurance contributions from your pay if you are:
The primary threshold in the 2008/2009 tax year is £105 per week. 11% of your earnings will be deducted in National Insurance contribution on all the money you earn that is above the primary threshold and below the upper earnings limit (between £105.01 - £770 per week). Over the upper earnings limit of £770 per week you pay 1%.
For example: if you are earning £250 per week you will not have to pay National Insurance on the first £105 of your wages. You will need to pay 11% of the difference between £105.01 and £250 (£144.99), a total deduction of £15.90 per week.
Your National Insurance Number is the unique reference number that the Inland Revenue uses to store information about your income. The Inland Revenue will keep information about how much National Insurance you have paid and how this affects any benefit you may be entitled to. The information in this publication applies to the amount of National Insurance contribution you will have to pay. For more information about how National Insurance contributions may affect your entitlement to benefits please see The Student Advice Centre.
If you are a UK student you will have automatically been given a NI number when you reached the age of 16. If you have lost this number you need to take two proof of address documents to your nearest Benefits Agency who will be able to trace your number for you. The proof of address can be a utility bill, bank statement or housing contract.
If you do not have a NI number you should apply for one when you start work. In order to apply, you must have either started work, have proof of a job offer or be able to prove you are actively seeking work (e.g. rejection letters, invitations to interviews in writing).
You will then need to call 0845 600 0643 between 8.00 am and 8.00pm, Monday to Friday to book an appointment at your nearest Jobcentre Plus.
You will need to take evidence of your identity, address and status to this appointmentVisit the direct.gov website for more information on applying for a National Insurance Number
Many students think that they are exempt from paying income tax. This is not the case.
Income tax is a tax levied by the government on income you receive during a tax year. You can be taxed on income such as earnings, tips, and any interest payments on savings that you receive. The tax year is different from academic years or calendar years and runs from April 6 to April 5. This means that any money you earn during the vacations of a tax year will be counted as taxable income for that year.
The amount that you pay will depend on how much you earn and your tax status.
You will not have to pay income tax on your Government Student Loan. If you are an international student and you would like advice on the tax liability for overseas funding please contact The Student Advice Centre.
The amount that you can earn before paying tax is called your personal tax allowance. If you earn more than this in the tax year you will have to pay tax.
If you are under 65 and earn less than £5,435 between April 6 2008 and April 5 2009 you will not normally have to pay tax.
There are additional allowances for other circumstances, such as people with children, which may mean you are able to earn a higher figure before you start to pay tax. If you think this may apply to you and you would like more details, please see The Student Advice Centre. Further details of tax thresholds are on the Inland Revenue site at http://www.hmrc.gov.uk/rates/it.htm.
Parliament decides each year how much we should be taxed, based on proposals put forward by the Chancellor of the Exchequer in his or her Budget. For the 2008/2009 financial year you pay income tax at two rates:
Emergency Tax assumes basic rate allowance, all at 22%
The 10% basic rate has been abolished in the 2008 tax year, except on savings income.
Tax is usually taken from your wages by your employer and passed on to the Inland Revenue. This is called the PAYE (pay as you earn) scheme. If you are in employment it is your responsibility to pay tax but it is the responsibility of the person who employs you to calculate your tax, deduct it from your wages and pay it over to the Inland Revenue. It is collected every week or month depending on how you get paid.
Your tax free allowance will be shared over the year so if you are paid weekly your allowances are divided by 52 (£5,435÷ 52 = £104.52 per week) and if you are paid monthly by 12 (£5,435÷ 12 = 452.92 per month). This gives you your tax-free pay for each pay-day. This means that if you are paid weekly and you earn £104.52 per week or less then you will not be taxed that week. Once you earn more than £104.52 per week your employer will start to deduct tax from your wages. Your employer cannot wait until you have earned £5,435 before starting to make tax deductions.
To make sure your employer does not deduct too much tax from your earnings, you will need to complete a tax form. The main forms you will need to know about are set out below:
P45
When you leave a job you should be given a P45 by your old employer which you should give to your new employer. Your employer will send Part 1 of the P45 to his or her Tax Office and give you Parts 1A, 2 and 3. You need to keep part 1A and give parts 2 and 3 to your new employer. This will tell them:
You should keep your P45 safe if you are not starting a new job straight away. If you start a new job, you should give your P45 to your new employer. Your employer will then send it off to their tax office and it will help them to calculate your tax code and work out how much tax you will need to pay.
P46
If you are starting your first job in a tax year then you should fill in this form. Your employer has to make sure that every new employee who earns more than £1 per week completes this form. If you have a P45 from your previous job then you do not need to complete a P46 unless you will be working in more than one job. If this is the case and you are going to be working for more than one employer you can still fill in a P46 but you only need to complete the section entitled ‘employee’
P38(S)
You should complete this certificate if you undertake a vacation only job and your earnings are likely to be less than the tax allowance (£5,435) in the tax year. You should complete this form and return it to your employer who will send it to their Tax District. If you are working during the Easter vacation and the 5th April falls during this period you should sign two P38(S)s. One will be for the tax year up to the 5th April and one will be for the new tax year from 6th April. You should then be paid without tax being deducted from your earnings. If you have already signed a P38(S) because you had a job in the holidays and you now have a term time job, you must inform your employer, who will tell the Inland Revenue. You will then be required to sign a P46 as well. If you continue to work for your term-time employer during the vacations you do not have to complete a P38(S).
P50
You can use this form if you have stopped work and you think that you have been charged too much tax during the year. You should complete the form and send it with your P45 to your employer’s tax district. You may need to ask your employer who this is. If you would like help in completing this form please see The Student Advice Centre.
P60
If you are in employment on the last day of the tax year (5th April) you will be given this form by your employer. It tells you how much you have earned and is proof of the tax you have paid in the previous year. It is very important that you keep this form safe and in a place where you can find it easily. You need to keep it for at least 22 months after the end of the tax year.
If you think that too much tax has been deducted from your wages but you are still in employment you should not fill in a P50. Instead you can send a letter explaining your situation to your employer’s tax district. If you are an International student and you are intending to return to your home country before the end of the UK tax year in April you can apply for a tax repayment before you have left your job. If you think you may be due a tax repayment you need to write to contact your employer’s tax office as soon as you know when you will be leaving your job. You will need to explain the date that you will be leaving your employment, state when you will be returning to your home country and include a letter from your employer confirming your situation.
The HM Revenue and Customers Student Tax Advice website has a tax calculator to help you work out if you are due a tax refund.
For more advice on students and tax, including answers to many frequently asked questions visit www.studenttaxadvice.org.uk
The Student Advice Centre
Leeds University Union
Leeds
LS1 1UH
Tel: 0113 380 1300
Fax: 0113 380 1301
email: advice@luu.leeds.ac.uk
Please note that we can only advise students at Leeds University
Queries about Income Tax
You can find out the contact details for your tax office at : www.inlandrevenue.gov.uk/local
Local Job Centres:
Dysons Chambers
Briggate
Leeds
Tel: 0113 215 5000
35 Eastgate
Leeds
Tel: 0113 215 5000
Benefits Agencies:
Leeds North (postcodes LS2, 7-8, 16-17)
Hume House
Tower House Street
Leeds
Tel: 0113 214 8300
Leeds North West (postcodes LS1, 3-6,11,19,21)
21-22 Park Place
Leeds LS1 2SL
Tel: 0113 214 8000
Please be aware that we are only able to advise current or prospective students of Leeds University.
These pages are for guidance only and are not a substitute for diverse legislation that they cover. The information was checked and correct at the time of writing.
If you have any comments or queries about this page please email advice@luu.leeds.ac.uk.
© LUU Student Advice Centre April 2008
