Well, the bad news is that whilst students don’t pay tax on grants or student loans, they are still liable for income tax and National Insurance in the same way as other workers.
The good news however is that for the 2005/2006 tax year you are entitled to earn up to £4,895 a year before you start paying income tax. So if you’ve got a part time job, and earn under £4,895, you won’t pay a penny.
Above £4,895, the amount you pay depends on the amount you earn:
Most employers deduct tax from your wages (called PAYE, or Pay As You Earn), and this is averaged out over the year. This means that although you may have a short term job, you pay tax on your income as though your job was year-round, and then you’re entitled to a refund at the end of the tax year.
You’ll also pay income tax on income such as savings interest or jobseekers allowance.
National Insurance (NI) is a contribution to state benefits, and is payable on all income over £94 a week. Between £94 and £630 per week, you pay 11% of your income in NI contributions. Any earnings above £630 a week are charged at 1%.
For more general information on taxes, visit our tax section. The student Job Shops’ organisation NASES produces helpful leaflets on students and tax, which you can download here: income tax: www.nases.org.uk/Media/downloads/90_15200312075316_98.pdf. National Insurance: www.nases.org.uk/Media/downloads/48_15200313074316_64.pdf
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