Working as a student: do I need to pay tax, what on and how much?

A part-time job is a great way to increase your bank balance – just don’t get caught out by tax rules.

Not so simple

If you're a student, you may have heard you don't need to pay tax or national insurance while at university.

But tax is rarely that simple and could involve far more complicated questions than anything you face on your course.

We've put together a guide to answer some of the most common questions students have about tax.

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Do I need to pay tax?

The good (or bad) news is that, as a student, you're unlikely to earn enough from your part-time or temporary jobs to pay tax on your income.

This is because every UK resident has what's known as a tax-free personal allowance – an amount they can earn before they start paying income tax.

For 2018/19, these amounts are:

• £228 per week
• £988 per month
• £11,850 per year

If you earn more than this - and you live in England, Wales or Northern Ireland - you'll pay income tax at rates of:

• 20% on earnings between £11,850 and £34,500
• 40% on earnings from £34,501 to £150,000
• 45% on earnings above £150,000

Say you make £20,000 (unlikely for someone studying full time, of course), your yearly bill would be £1,628.

In April 2019 the personal allowance will increase to £12,500.

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National Insurance

You'll also need to make national insurance contributions on anything you earn above £157 per week.

Let's return to our example of the miraculously high-earning student. If you did manage to make £20,000 a year, your contributions would be £1,389. 

As explained below, you shouldn’t need to take action to pay National Insurance, unless you’re self-employed.

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Living in Scotland

If you're studying in Scotland, the rules are slightly different

While you'll still have a personal allowance of £11,850, you'll pay income tax rates of:

• 19% on earnings between £11,850 and £13,850
• 20% on earnings between £13,851 and £24,000
• 21% on earnings between £24,001 to £43,430
• 41% on earnings between £43,431 to £150,000
• 46% on earnings over £150,000

How do I pay tax?

In most cases, you won't need to do anything to pay your bill.

Your employer will normally take your income tax and national insurance contributions directly from your wages. This is known as Pay As You Earn.

If you're self-employed, however, you'll need to fill in a self-assessment tax return to make arrangements for paying your bill.

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Tax overpayments

If you suspect you've paid too much tax, you should contact your local tax office armed with information such as your P45 or P60 forms (if you have these).

Be aware, HMRC has issued a warning as thousands of students at hundreds of universities report being sent fraudulent emails claiming to offer tax refunds in an attempt to gain these students' personal details.

For more information, see the Government's online tax checker.

Work experience and internships

As a student, you may want to undertake work experience or internships – either as a requirement of your course or to boost your employment prospects.

Unlike permanent employment, internships usually have a fixed end date, allowing you to return to your studies.

During your internship, the company may be legally required to pay you the minimum or living wage, dependent on your age. 

If you're only working for a relatively short amount of time on the minimum wage, you'll be unlikely to make enough to pay income tax or national insurance.

Be aware, not all interns qualify for minimum wage, such as:

• those undertaking work experience as a course requirement
• volunteers
• those shadowing the company's employees

Before you begin working, it would be sensible to confirm the payment arrangements in writing with your employer.

Make sure you aren’t getting cheated out of a paycheque – read more about your employment rights here.

Loans, grants and bursaries

When you're applying for student loans towards your tuition fees and living costs, the Student Loans Company (SLC) will need the details of your household income – in practice, this part-time the earnings or benefits your parents receive.

If you're also working during the academic year, you don't need to declare income from your employment, which includes holiday, evening and weekend jobs.

There is one exception: if your permanent employer allows you time off to attend a course, you'll need to let the SLC know the details of your income.

The majority of loans, bursaries and grants are exempt from income tax – although some private bursaries may be taxable, so it's always wise to double check. 

Working abroad

If you work abroad for part of the year, you'll need to pay income tax on anything you earn above your personal allowance.

If the company is registered in the UK, you’ll also need to make national insurance contributions.

With employers based in another country, you won't need to pay national insurance part-time but may need to pay taxes in the region you're working in.

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Council Tax

Whether you need to pay Council Tax as a student depends on who you're living part-time.

If you're a full-time student living in accommodation in which all the other tenants are also full-time students, you won't need to pay Council Tax.

To count as a full-time student, you'll need:

• to be on a course lasting for longer than one year
• study for more than 21 hours a week

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Tips

If you're working in a restaurant, bar or café, you'll probably receive tips from customers.

You'll need to pay tax on your tips if you earn above your yearly personal allowance, but the rules around national insurance are more complex.

If a customer hands you a tip directly, you'll have to pay income tax, but will be exempt from national insurance.

You may need to fill in a self-assessment tax form to declare these tips – otherwise, HMRC will estimate your tips and you could end up paying more.

If your employer includes your tips in your wages, you'll need to pay both income tax and national insurance, but won't need to fill in a self-assessment form.

Read our full guide to beating the taxman

How to get help

If you're concerned about tax, there are a number of online resources to help:

• Gov.uk
• The Low Incomes Tax Reform Group 
• TaxAid
• Citizens Advice