Do students Pay tax ?

Prothet_of_Doom

Okay I know what I think the answer is, but my SIL is adament that I'm wrong.

My Son, has got a Year Long Industrial Placement starting in August 2014 and the company are paying him £15K for the year.

He has to pay half fees for the year, so that the university can inspect his work and mark his project (bargain or what?)

I reminded him that after tax and National insurance that would be worth in today's tax figures about £13K.

SIL reckons that "Students Don't Have to Pay tax" and would have happily bet her life on this 'fact'.

A misconception I'd suggest?

I tried to explain that he probably wouldn't pay much tax, beween August 2014 and April 2015, but he would have to pay NI, and then From April 2015, to August 2015, he would pay tax, but could claim it back if he did no more paid work between August 2015 and April 2016.

Given that it's an 'open' sandwich - that is the final (4th) year is the year in Industry, and he'll hope to go straight into work in August 2015, and therefore no tax will be reclaimed.

Cornucopia

Anyone with an annual income above their personal allowance is potentially liable for tax - pretty straightforward, I would have thought?

Voyager2002

The answer depends exactly what that 15K is... If it is a (small) salary then he will indeed pay a bit of tax. However, some students receive money called something like a stipend, bursary or living allowance, and these payments are free of tax and NI.

The employer and/or university ought to know.

Prothet_of_Doom

Well, I'll be a bonus to him if that's the case.

Florasaurus

Yes, it's declarable income, most of my friends are on years in industry now, you get tax and NI taken off your paycheck but as far as I'm aware the accounts person wherever he works will do it automatically, so he'll never actually see it.

Obviously because a year in industry will be over two tax years, you could probably get some of that tax he paid back at the end of the 2 tax years

Prothet_of_Doom

Florasaurus wrote: »

Yes, it's declarable income, most of my friends are on years in industry now, you get tax and NI taken off your paycheck but as far as I'm aware the accounts person wherever he works will do it automatically, so he'll never actually see it.

Obviously because a year in industry will be over two tax years, you could probably get some of that tax he paid back at the end of the 2 tax years

It's an "OPEN" sandwich which means that he's currently in his last academic year, but his final year is the year in industry.

Which is a bit strange, but they do a project and distance learning modules which count towards the final mark.

The implication of this is that they probably go straight into a graduate job, there or somewhere else and won't be claiming any tax back (if they are lucky) :T

Prothet_of_Doom

Cornucopia wrote: »

Anyone with an annual income above their personal allowance is potentially liable for tax - pretty straightforward, I would have thought?

I know why my SIL is confused. If you do a year out normally you'd split the tax over 2 tax years and not hit the personal allowance in either.

Shushannah

My son did a year in industry he paid no tax in the first tax year, in the second it was all refunded at the end of the year.
Technically they don't pay tax because they don't earn enough in either tax year but the way PAYE worked he had to pay in advance.

Hope that helps.

redpete

Prothet_of_Doom wrote: »

SIL reckons that "Students Don't Have to Pay tax" and would have happily bet her life on this 'fact'.

A misconception I'd suggest?

Total nonsense I'd suggest. If someone earns enough after allowances to pay tax then they will, being a student makes no difference.

Jonboy_1984

Students could previously register for an exemption for holiday periods work (Easter, Summer and Xmas only). This was seemingly because they were unlikely to hit their personal allowances within these periods and saved refunds of tax afterwards.

This seems to have ended as of this tax year - http://www.hmrc.gov.uk/students/work_hols_while_student_8_1.htm