students and income tax

freebie_junkie

my friend told me tahts he doesnt opay incoem tax up to £5000 a year, we are both full-time students but im self-employed, will i not have to pay tax on proffits up to £5000 or does it not apply to self-employed students? thanks

dmg24

The fact that you are a student is irrelevant. You will have the same tax code as a 'normal' person.

gingercordial

Everybody has a yearly tax-free allowance, which this year is £5,035. That doesn't matter if you are a student or not, or self-employed or not.

If you're employed, you'd normally get tax deducted from your salary every week/month. If you KNOW that you won't earn over £5,035 in the year, you can fill in a form which asks for your salary to be paid with no tax. I expect that's what your friend means. Again this isn't just for students, but students tend to be the people who are likely to earn less than that in a year as they aren't working full-time. Students who earn more than that DO get taxed as they aren't allowed to sign that form.

You are self-employed so you'll have to do a tax return at the end of the year and would normally pay your tax then, but if you haven't earned over your personal allowance, you won't have any tax to pay.

Hope that helps - nothing unfair about it as you both get the same amount of tax-free allowance.

dmg24

Sorry, I didn't explain that very well (it's late!).

Both employed and self employed students pay the same as their 'normal' equivalents i.e. we all have the £5030 (or something around there!) personal allowance.

Tax and allowances for the self employed are quite complicated, especially in your first year of trading.

This guide will give you more information:

http://www.hmrc.gov.uk/startingup/working-for-yourself.pdf

Savvy_Sue

You do need to keep half an eye on it now though, to make sure you're not likely to go over that £5000 (and remember you'll be able to deduct legitimate expenses from your income). Because the tax due on S/E is due pretty promptly, so once you anticipate having to pay some you need to stick it aside in a savings account, ready ...

Because if you find that your income on which tax is to be calculated is actually £10000, and you've spent it all rather than putting any aside, the taxman takes a dim view of that ...

guerillasaver

freebie_junkie wrote:

my friend told me tahts he doesnt opay incoem tax up to £5000 a year, we are both full-time students but im self-employed, will i not have to pay tax on proffits up to £5000 or does it not apply to self-employed students? thanks

Do you mind me asking what you work as? I work as a musician and am in the same boat as you.