As many full-time students prepare to find temporary work over the Christmas period, they may find that they are in line for tax free income.
HM Revenue & Customs (HMRC) is reminding them that they may not need to pay income tax on their earnings, if these are below their Personal Allowance for the year.
The good news for many full-time students who are intending to work over the festive season is that – providing they expect to earn less than £6,475 in the tax year to 5 April 2010 and complete a form P38(S) at the beginning of employment – they will be entitled to receive their money tax free.
Students can find all the information they need at: www.direct.gov.uk/studenttaxadvice.
Furthermore, students who have worked part-time throughout the year, and think they may have paid too much tax, could be eligible for a cash refund. They can either use the student tax calculator on HMRC’s website (http://www.hmrc.gov.uk/calcs/stc.htm), or visit the HMRC tax fact Facebook application, Universilly Challenge. This encourages students to get the lowdown on the tax facts that matter to them.ÂÂ
Three out of every four students take paid work, and if they have worked part-time during term-time, or intend to get a temporary Christmas job, HMRC wants to help them to get the facts about tax right so that they don’t pay more than absolutely necessary on their hard-earned cash.
Jane Frost, Director of HMRC Individuals Customer Directorate, said:
“Before starting any vacation job, it’s a good idea to make sure you know about tax.
“Making sure your tax code is right from the start of your paid employment can save you money and is good training for life after graduation. We want to help students understand how the tax system works so they don’t pay more than they should and also get back what is due.”
1.       Key questions for Students
As well as being aware of their Personal Allowance, students should also find out:
- What do I do with forms such as the P45, P60 and P38(S)?
Students who plan to work only during the holiday periods, and expect to earn no more than the Personal Allowance (currently £6,475) in the tax year can ask their employer for a P38(S) which they should complete and return to the employer at the start of their job. A P45 is given out at the end of a job and shows the pay received and tax deducted between the start of the tax year (6 April) and the date the employment ceased (if before 5 April the following year). The P60 summarises the yearly earnings and tax paid for a particular job. Students with more than one job at the 5 April each year will receive a P60 from each employer. The P45 and P60 forms should be kept in a safe place for future reference.
- What does my tax code mean?
Your tax code shows how much you are allowed to earn before paying any tax. This helps employers to work out how much tax to deduct from your pay.
- What if I have more than one job?
Like everyone else, students have only one Personal Allowance for each tax year and if they start a new job without finishing their first job, their second employer will ask them to fill out and sign a form P46. The employer uses the information on the P46 to notify HMRC that a new employee has started and to ensure the correct code is operated on earnings from the second job.
- What are National Insurance contributions (NICs)?
NICs pay for social security benefits that you may receive later in your life and help pay for the National Health Service. National Insurance contributions are recorded against a person’s name using a National Insurance Number. NICs are deducted at source from pay by employers and cannot be claimed back. They are only paid once your income exceeds £110 a week. You’ll need to keep a record of your National Insurance Number for any dealings with their tax office and their employer(s). ÂÂ
- Who do I need to tell when I change address?
HMRC needs to be kept informed of your address. This is the individual’s responsibility – don’t assume your college or university will do it – and ensures you won’t miss any important letters or forms – or rebates!
2.       About the Student Tax advice campaign
A website for the campaign aims to become the first port of call for students with questions about tax: www.direct.gov.uk/studenttaxadvice.
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Paul Gray is an entrepreneur and digital publisher who creates online publications focused on solving problems, delivering news, and providing platforms for informed comment and debate. He is associated with HRZone and has built businesses in the HR and professional publishing sector. His work emphasizes creating industry-specific content platforms.
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