12 month placement & tax

justincredible_2

Hi,

I am a student doing a 4 year business studies course with a sandwich placement year next year. Does anyone know what the tax situation is regarding placement years and students? I know we do not have to pay for council tax but do we still pay national insurance?

many thanks for anyone who can let me know

telly-addict

If you are over 16 and earning more than £82 per week you will be due to pay Class 1 National Insurance. There is nothing to pay up to £94 per week and then either 9.4% (contracted out of SERPS) or 11% (not contracted out) on the amount from £94.01 to £630 per week. This goes towards your State Pension entitlement so it isn't all bad.


You will also have to pay income tax via Pay As You Earn, you will have the personal allowance of £4895 (the amount you can earn tax free), then 10% tax on £1-2090 per annum, 22% on the next £2091 -32400 and then it would be 40%, but I guess you won't be getting that much!

Fill in a form P46 so that the employer taxes you correctly. Unless that is you have some other employment in which case give them the P45 from the previous employer.

These are the rates that apply until 5 April 2006. Generally the allowances and rate bands increase each year.
Any more questions just ask.

stuwilky

In addition a reminder that when you finish your placement next summer you may be entitled to a refund on the tax paid (not NI) from April 5th - the end of your placement depending on how much youve earnt and whether you intend you work part time furing your final year.

Its worth checking with the tax office when you finish.

telly-addict

stuwilky wrote:

In addition a reminder that when you finish your placement next summer you may be entitled to a refund on the tax paid (not NI) from April 5th - the end of your placement depending on how much youve earnt and whether you intend you work part time furing your final year.

Its worth checking with the tax office when you finish.

This is because you are allocated 1/12 of your personal allowance, 10% and 22% rate bands each month. If for example you only worked for 8 months of the tax year, you would still have 4/12 of personal allowance etc to set against your taxable income, giving rise to a repayment.

The same logic applies to women giving up work to go on maternity leave and only working part a tax year.

darude

right, sorry but everything was way too technical for me...

I earn £17,000 during my placement year and over the whole year get taxed and NI'ed about £4000.
So my basic question is, how much of that £4000 do you think I could claim back? And if you have the time, could you outline the procedure?

Sorry for being so dumb, thanks in advance for your replies. :xmassmile

Savvy_Sue

Phone your local tax office, or the office which deals with the company you're working for (HR should be able to give you details). It's possible that you won't get anything back if they've taken into account the fact that you're not working for the whole tax year. But if you have paid more tax than required, then you'll probably have to fill in a tax return (which shouldn't be too scary) at the end of the tax year.

I think you will almost certainly overpay next tax year, ie April 2006 onwards, even if you're not overpaying this tax year, because the assumption will be made that you will continue to earn at the same rate throughout the tax year. So when you finish your placement you will be given a P45. If you do any other paid work while you're still studying, then pass the P45 on and your tax should be adjusted accordingly.

I don't know if refunds are made before the end of the tax year, but the tax office should be able to tell you.

harrisl_2

It all really depends when you finish your placement. The tax year runs from April. So if you started your placement in, say July, you are working in two tax years:

Tax year 2005/06 July 2005 - March 2006
Tax year 2006/07 April 2006 - June 2006

You then need to work out how much you got paid in each tax year.
In this circumstance, the tax in the tax year 2006/07, you would have earned below the threshold for paying tax (i think you still have to pay NI).

Tax year 2006/07 working April, May and June. = 3 months.
£17,000/12= 1416 per month
1416 * 3months = 4250
This is about the threashold amount i think.

This is assuming you dont work when you go back to uni, or you are still below the threashold). The reason the calculation isnt done automatically, is that the tax office dont know you're finishing in, say July, they think you're going to be working indefinatly.

Hope this helps.

millie

If you finish your placement before the end of the tax year you can claim your refund, straight away without waiting until the end of the tax year, as long as you will not be doing anymore paid work during that tax year. Just fill in the form that can be downloaded from the Inland Revenue Website. Form
P50.

http://www.hmrc.gov.uk/individuals/iwtclaim-a-tax-or-ni-repayment.shtml