Tax. It’s not exciting. It’s not sexy. However, it turns out that knowing just a little bit about it can save you a lot of money.
Many students take summer jobs to help them earn a little extra cash so that they can go on holiday with their friends, go to that festival where their favourite band is playing, or simply save up to cover their living expenses at university. But as a student in your last year, or preparing for a postgraduate degree, the last thing you want is to lose a chunk of your hard earned cash to the taxman, so it’s important to be aware of your tax obligations.
The good news is that you may not have to pay any tax at all. According to a press release by HM Revenue & Customs in July, many students don’t know that they needn’t be paying tax on their holiday earnings. To ensure that students across the country are not paying unnecessary tax, HM Revenue & Customs have issued a reminder to students, universities and employers about the current tax laws.
Stephen Banyard, the Director General of Personal Tax at HMRC, said "We don’t want students to pay tax when they don’t owe any, so we’re encouraging them to fill in a P38(S) and send it back to us. That way they can keep all the money they’re earning for student life’s essentials."
How to tell how much tax you need to pay:
Here’s the important bit. If your total earnings for the tax year (remember that the tax year starts on the 6th April) are less than the personal allowance of £7,475 then you don’t have to pay any tax on the money that you make.
So how do you make sure you don’t pay unnecessary tax? Fortunately, HM Revenue & Customs have made this easy for you. All you have to do is fill out a P38(S) form which can be downloaded from the HMRC website at: www.hmrc.gov.uk/forms/p38s.pdf
For those of you who didn’t manage to fill in the form, there’s no need to panic. You can claim back any tax you’ve already paid by sending HM Revenue & Customs a P50 form which is available online at: www.hmrc.gov.uk/pdfs/p50.pdf.
Who is eligible for tax exemption?
You’ll qualify for tax exemption as long as you will be returning to full time education at least until the end of this tax year (5th April 2012). It’s also worth remembering that this exemption relates to PAYE (Pay As You Earn) Income
Tax only and does not cover National Insurance contributions, which you’ll need to pay if you earn more than £139 per week.
If you have a job during term time, you can’t use the P38(S) form just for your holiday job – you’ll need to take into account your earnings for the whole tax year.
Go to www.studenttaxadvice.direct.gov.uk/index.html for more information on student tax obligations, and you can use their Student tax Calculator to see if you are entitled to claim a tax refund on work already done.