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.
However, the good news is that you are entitled to earn a certain amount before you start paying tax - this is called your personal allowance. You can get information on the current allowances on the HM Revenue and Customs website.
For the 2009/2010 tax year, you are entitled to earn up to £6,475 a year before you start paying income tax. So if you’ve got a part-time job, and earn under £6,475, you won’t pay a penny.
Above your personal allowance, the amount you pay depends on the amount you earn. In 2009/2010:
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.
If you only work during the holidays, and you expect to earn no more than the personal allowance for the tax year, just ask your employer for a Form P38(S) (PDF 94K). Fill this in and you won't have any tax taken out of your wages.
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 £105 a week. Between £105 and £770 per week, you pay 11% of your income in NI contributions. Any earnings above £770 a week are charged at 1%.
For more general information on taxes, visit our tax section. The student Job Shops’ organisation NASES produces helpful information on students and tax.
