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Student Summer Tax Scares

There is a myth amongst students that you should not be paying taxes. But Is there truth to this myth?

After an academic year, many students will take on a part time job, either to replenish the diminishing (if any) leftovers of the student loan. Or to simply fuel the summer activities.

In most cases, a part time job will be three or four shifts a week, and usually pay the minimum wage. [£5.60 (18+), £7.05 (21+), £7.50 (25+)]

Income tax only has to be paid on yearly earnings over £11,500 (17/18). So if you earn around £250 a week for 10 weeks, you won’t have to pay income tax due to being under the threshold.

However, if you are being taxed, there can be a number of explanations.

Firstly, PAYE may have automatically deducted income tax using those 10 weeks worked as a basis for a year’s earnings.

So, if you are earning £250 a week, over the course of the year you would earn £13,000, thus being over the threshold.

But if wrongly deducted by PAYE, this tax is reclaimable via HMRC.

The National Insurance Contributions (NIC) threshold is currently £157 a week. The payment of NIC is 12% of the excess over the £157.

So for someone earning £250, they would pay £11.16 due to the 12% NIC taken from the excess over the threshold.

Unlike the PAYE assumption, the NIC is not refundable.

A final explanation for why you may find yourself being taxed, could be due to one working a part time job during your time at university.

If weekly you earn less than £157 a week, you will not be deducted income tax or NIC.

But, if you earn over this amount weekly you will be deducted 12% of the excess.

Likewise if you are a full time student, yet are also earning over the personal allowance threshold, you will also pay income tax.

The current income tax rate is 20% on earnings over the threshold.

So, if you find yourself puzzled as to why you’re being taxed as a student, then these reasons should identify the causes.

The theory of students not paying taxes is simply nothing more than… a myth.

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