Students aren’t exempt from paying tax. As the amount of tax you pay is related to your income from employment, then students often don’t earn enough to have to pay tax. Even if you don’t earn enough to pay tax, the UK tax office, Her Majesty’s Revenue and Customs Service (HMRC) still need to know about your earnings to decide if you need to pay tax or not.
What is a National Insurance Number and why do I need it?
Everyone who wishes to work in the UK must have a national insurance number. You can start working without one, but you will need a national insurance number in order to be paid properly. This number allows HMRC to identify how much you have earned and how much tax you need to pay. Don’t disclose this number to anyone you don’t know as the number is also often used to identify you, especially in relation to claiming benefits.
How do I get a National Insurance Number?
If you are a UK citizen, you should automatically be allocated a national insurance number just before turning 16. If you think you should have a national insurance but don’t know then visit then contact the HMRC using their online guidance form.
If you aren’t a UK citizen then you will need to apply for a national insurance number.
In Semester 1 only of an academic year the Careers Service will offer appointments to obtain a National Insurance Number. Details of these dates will be posted here when available.
Alternatively, you can request an NI number by calling the National Insurance number application line: 0800 141 2075. Although this is a freephone number, some phone providers may charge for the call. You can telephone free from the Advice Place if you think you will charged.
You may need to give this information:
- - Your UK postcode and address
- - You passport details/number
- - The contact details of your employer if you already have a job offer
You will then normally be asked to attend a National Insurance number interview, which is organised by Jobcentre Plus and will take place at your local Jobcentre. You will be told what documents you need to bring with you; these will usually include:
- - Your passport or ID card (and visa if applicable)
- - Proof of address
- - Matriculation card
- - Police registration documents (if this applies)
Interviews normally take around 30 minutes and it is important to arrive around 10 minutes early as late arrivals can lose their appointment.
It will the take around 2 or 3 weeks to obtain a number. If you have had an interview and have been told a national insurance number is being sent, let your employer know, as they may be able to pay you with that information.
What is National Insurance?
There is a common misnomer that National Insurance is what you pay to receive health cover in the UK. National Insurance is a form of tax and the money collected is used to help pay for welfare benefits, pensions and the NHS. The amount you pay is based on your income and employment status, not on how often you access the NHS.
You don’t need to pay National Insurance on the first £166 you earn in a week. If you are self-employed and making a profit of £6,365 a year. Once you earn this amount you will pay 12% of your earnings above that.
What is Income Tax?
Income Tax is a tax collected on your earnings which helps pay for running public services. If you earn more than £12,500 (called your personal allowance) in the tax year 2019/2020 then you will begin to pay income tax on your earning above that. A tax year runs from 05 April one year to 04 April the following year. The tax you pay is staggered until you are earning £44,000, at which point you pay 40%. The Scottish Government sets their own income tax rates for those resident in Scotland, you can view the rate you pay here.
Your student loan and most stipend funding are not taxed, and do not count as earnings when working out how much you have earned in a year.
How is my tax collected?
HMRC (Her Majesty’s Revenue and Customs Service) is responsible for collecting tax in the UK.
Most people have their income tax deducted from their wage slip by their employer before being paid. You have a right to see any deductions that have been made from your earnings; this is usually done through a payslip. Your payslip will detail which tax code had been used to calculate how much tax you should pay. The most common tax codes for students are:
S1250L (refers to someone living in Scotland who can earn £12500 before having to pay tax). This is the tax code most people have)
W1 or M1 (an emergency tax code used if you are starting a new job part way through the year. They will calculate your tax based on you having earned the same amount each month, if you haven’t earned this amount every month this can mean you have overpaid)
OT This is a tax code incorrectly used by some employers when they don’t have any information about your previous employment in the tax year. This tax will result in you not being given a personal allowance and paying tax on all of your income. If you see this on your payslip, contact your employer to ask them what information they to need to calculate your correct tax code.
If you are self-employed and earn more than £1,000 in a tax year then you will need to complete a self-assessment tax return to HMRC. If you are self-employed it’s important to keep a record of all your sales, earnings and expenses. Advice on how to do this can be found on the TaxAid Website and you can file your return on the HMRC website.
P45 and P60 forms
You’ll get a P45 from your employer when you stop working for them. This show much you have earned and how much tax you have paid. This is important as it lets your new employer know how much of your personal allowance you have used so they can make sure you pay the right amount of tax. Make sure you give this to your new employer as soon as you start work.
If you don’t have a P45 you should complete a Starter Checklist to let your employer know the information they need to calculate your tax code.
At the end of the tax year your employer should give you a P60. This details your earnings for the tax year and how much tax you have paid. Keep this document safe, you may be asked to provide it for applications where your income needs to be assessed.
I think I have paid the wrong amount of tax
Students can sometimes pay the wrong amount of tax, especially if you have worked in a full-time job over the summer earning over the tax threshold. This is because the way tax is calculated (PAYE or pay as you earn) makes assumptions that you will earn that amount each month for the rest of the tax year.
This is not necessarily a mistake by your employer but you can claim a tax refund if you think you have overpaid. Sometimes this will happen automatically at the end of your employment or at the end of a tax year, but not always. You can apply for a tax refund on the HMRC website.
If you haven’t paid enough income tax then HMRC will normally contact you to let you know. If you are in employment then they will normally adjust your tax code so that your employer collects more tax for the remainder of the tax year.
I do some work on a self-employed basis?
If you earn more than £1,000 a year from self-employment you will need to register as self-employed with HMRC (you can be employed and self-employed at the same time).
NationaI Insurance Registrations Helpline
Telephone: 0800 141 2075 Textphone: 0800 141 2438
Monday to Friday, 8am to 6pm
Tax Information at Citizens Advice
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