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Do students pay tax? All your questions answered - The PAYE People

August 27, 2021by The PAYE People

Like most people, you probably are sick of hearing about taxes, but staying informed about them remains to be an important undertaking. One of the questions that we often get here at PAYE People is “Do students pay tax?” If you are in these shoes and wondering if you have to pay taxes as a student, this post will help you understand. 

The short answer to “Do students pay tax” is yes. Students are obligated to pay tax on income like everyone else. This tax is dependent on the income you receive for example, from a part-time job. Most students in the UK work part-time to supplement their college finance package and as a result, they will be legible if what they earn falls within the tax bracket.

Students pay tax, but there’s good news

Everyone pays income tax, including students, on anything they earn. This is true even if your employer is a foreign business, or if you are self-employed. Whatever is collected goes towards government projects like:

  • Health
  • Education
  • and public commute systems.

The good news is that there’s a threshold. According to the 2019/2020 tax year, you are not obligated to pay any tax if you are earning less than £12,500 per year. This is known as Personal Allowance. Anything above this amount, you pay taxes according to the amount you earn.

Another thing to take into account is for international students. International students won’t need to pay income tax on the money you bring into the country to fund their education. Even better, no tax is required for scholarships, bursaries, grants and education loans. 

Tax exemptions are also available for people who come from countries that have double taxation agreements with the UK government.

Students on their phones researching do students pay tax

How am I going to pay my income tax?

If you earn money from self-employment or any other source, you have to declare it on your self-assessment tax return annually. For students that have part-time jobs, their taxes are automatically deducted through PAYE (Pay As You Earn) through their workplaces. You’ll often get records of this transaction on your payslip.

How should I file my income tax return?

Now that the question of “do students pay taxes” has been answered,  it’s important to know how you can file your income tax return as a student. Income tax returns are filed over the financial year (that’s from April to April). You do this by filling a self-assessment form and submitting it to HMRC. Submissions can be done online before 31st January or by post before 31 October.

Self-assessment forms can only be submitted if they have a unique tax reference (UTR) number. You get this number by calling HMRC on 0300 200 3310. It’s often used on documents from HMRC.

Do I qualify for tax exemptions?

It’s worth noting that bursaries, grants and scholarships are considered as non-taxable income –  so you shouldn’t worry about them. Also, there is a group of people who are exempt from paying income tax. These include:

  • Those who have lived in the UK for less than 183 days within the financial year
  • You study under the sponsorship of your employer who lets you work overseas as you study in the UK
  • Students on a PhD stipend
  • You are a foreign student from a country that has a double taxation agreement with the UK

A barista preparing a coffee for a customer

How much income tax do you pay on your earnings?

A student only starts paying tax when they surpass the £12,500 earnings mark every financial year (earning under this is considered your Personal Allowance). Below is a table that shows income tax per earnings in the UK:

Income tax on earnings in England, Wales N. Ireland.

England, Wales N. Ireland Taxable Income Tax Rate
Personal Allowance Up to £12,500 0%
Basic Rate £12,501 – £50,000 20%
Higher rate £50,001 – £150,000 40%
Additional rate More than £150,000 45%

Income tax on earnings in Scotland

Scotland Taxable Income Tax Rate
Personal Allowance Up to £12,500 0%
Starter Rate £12,501 – £14,585 19%
Basic Rate £14,586 – £25,158 20%
Intermediate Rate £25,159 – £43,430 21%
Higher Rate £43,431 – £150,000 41%
Top Rate £150,000 or more 46%

How do I claim back tax when I overpay

It’s not uncommon for students to overpay income tax. If this happens, you can go through the available processes to claim a refund. You can claim a refund for up to four years after submitting your taxes. The government reimbursing your overpaid tax is what is called a tax rebate. You can claim an overpaid income tax in the following circumstances:

  • If you have already paid taxes but stopped working before the tax year ended
  • If you’ve been put on an emergency tax code or one that’s incorrect. If you begin working without a P45 and your boss hasn’t confirmed what you should earn in that tax year, you are put on an emergency tax code ending up paying more income tax than you should.
  • If the course you are taking requires you to take a placement year that runs from September to June, giving an impression of working for two years and as a result, you overpay your taxes.

The HMRC often adjusts these taxes and can refund them to you at the end of the financial year. But you can still claim the overpaid taxes using a P50 form if you need the refund before the end of the tax year. Most people do this if they are no longer working, for which your former employer should assign you a P45.

You should get back your refunds within five weeks from the HMRC.

A jar of british pound coins with an array of twenty pound notes and ten pound notes.

What if you haven’t paid your income tax?

Paying taxes is an obligation for every eligible earning person in the UK. If you forget to file your returns and do it three months later, you’ll have a £100 fine to pay. You may also get a £10 daily penalty over the following three months. If you persist and decide to pay after six months, expect an additional £300 penalty or 5% of the tax liability. Whichever amount is greater is what the taxman takes. For returns filed a year after the deadline, you may get penalized up to 200% of the tax liability.

If you are unsure what to declare in your tax returns, you are allowed to avail provisional figures then, later on – provide the confirmed amount. Do this as soon as you have your figures right.

Look for a professional to help you understand your tax obligations

Even the most sophisticated business people find themselves struggling to keep up with taxes. That’s why they hire tax professionals to help them understand and comply with their taxes. As a student, if you don’t understand taxes, talk to a professional like your banker to help you understand this subject further. Tax-related issues may be complicated, but once you know what to look for everything falls into place.

Summary

Students pay taxes based on their income. So you’ll pay taxes whether you are employed on a part-time basis or self-employed, as long as your earnings are above the personal allowance. Make sure you keep an eye on your payslips and business earnings to stay up to speed with taxes. Don’t be caught out for violating tax laws.

Talk to The PAYE People today

If you are a part-time employee and a student, and perhaps have a uniform that you have to wear. You may be eligible to claim a tax return for up to four years. The same applies to your travel expenses too if you are constantly travelling to work or perhaps need accommodation for your role. 

The easiest way to get back all the tax your owed is to get in touch with our expert team here at The PAYE People. With an in-depth knowledge of HMRC’s rules, we can give you a clear sense of exactly what you’re eligible to claim. Not only that, but we can take over the claims process for you. We’ll help you gather the necessary evidence, fill out all the forms properly.

We offer free consultations, so if you think you may be owed a tax rebate, get in touch today. We can discuss the specifics of your situation and help you understand if you’re owed money. If we think you are, we can take over the claim on a no-win, no-fee basis. If you don’t get a refund from HMRC, you won’t owe us a penny. Get in touch with us today to start your claim or drop us an email and one of our experts will get back to you.

The PAYE People

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