Once upon a time, declaring your student status meant you could be paid from your low-earning summer-time job and not pay tax. Although not everyone knew about it, the rules have changed. The government has ended tax-free status and now students working over the summer holidays will be taxed like anyone else.
The good news is, you’ll be able to claim it back. Here’s what you need to know.
Know your limits
Low earnings no longer guarantee exemption from paying income tax and national insurance. It doesn’t matter what your temporary job is, if you earn more than £987 in a single month. Even though most students will almost certainly be earning less per year than the £11,850 personal threshold – the amount at which you start paying income tax.
What can I earn?
What you earn depends on your age, the type of work you do but mostly where you are in the country. You’re entitled to the minimum wage, which increases when you reach 21 (from £5.90 per hour to £7.38), but higher wages are offered in the cities, particularly London.
Some jobs come with the benefit of tips, particularly functions and hospitality events.
What are the benefits?
Your employment status means your employer has to treat you exactly the same as any other employee, right down to your entitlement to pensions auto-enrolment.
So, what’s changed?
Previously, students would complete a form declaring their full-time educational status and confirming they would not be earning more than the personal allowance over that tax year. No tax would be taken.
Now, real-time tax reporting has been introduced. Your personal allowance is on average £987 a month: if you earn more, you have to pay income tax. If you earn more than £157 a week you will have to pay National Insurance. This is all deducted from your wages by your employer through the PAYE (Pay As You Earn) scheme.
How do I know if I can claim my tax back?
Sometimes it’s hard to keep track of what you have, and haven’t paid, especially if you’re changing jobs lots, or do more than one. Add together all the money you earned during the tax year (April – March). If you have earned less than £11,850 you can claim it back.
Anything else I need to know?
If you’re working overseas, other tax rules may apply, so seek advice to ensure you pay your dues, but also know whether or not you are entitled to re claim it when you finish. You’ll also want to be sure you don’t pay tax twice. Keep evidence of your earning as you might need to refer to it later.
How do I claim it back?
If you do end up paying too much tax on your earnings, you can ask HMRC to arrange for it to be refunded. There’s usually a form you need to complete but this can be done online.
Yes – you have four years from the end of the tax year to make a reclaim. After that period, you’re no longer able to claim. So for the tax year 2017/18, which ended on 5 April 2018, any reclaim must be made by 5 April 2022.
The other thing to remember is that, even if you ask HMRC to look into just one year’s tax situation, they may take the opportunity to look over others: just in case you want to consider that.
GOV.UK has a wealth of information available, but if it’s not quite clear, call them or try Tax Guide For Students.
And remember, the summer is a chance to take a break from studying, ready to return in September. Have fun this summer.