I'm a student- should I be paying tax on my wages or savings?

dreamtimetk

Hello.

I'd appreciate any comments or advice.

I have a Premier Direct Account with the Alliance & Leicester. I'm not certain but I think the rate is about 3%.

I'm currently a full-time student at college with a part-time job. Both the monthly installment of my student loan (£380) and my monthly wages (£380) get paid into the account (about £760 per month).

I am not sure whether the student loan is classed as taxable income.

I am interested to find out whether I should be paying any tax on the income from a part-time job or whether my yearly income falls within my personal tax allowance

- If my income is classed as being less than my personal allowance, how do I claim back any tax I have previously paid?

- If so, how would I make the most of my tax-free status in terms of interest from my current account and any savings I might be able to start?

Thank you in advance.

dreamtimetk

chrisbur

dreamtimetk wrote: »

Hello.

I'd appreciate any comments or advice.

I have a Premier Direct Account with the Alliance & Leicester. I'm not certain but I think the rate is about 3%.

I'm currently a full-time student at college with a part-time job. Both the monthly installment of my student loan (£380) and my monthly wages (£380) get paid into the account (about £760 per month).

I am not sure whether the student loan is classed as taxable income.

I am interested to find out whether I should be paying any tax on the income from a part-time job or whether my yearly income falls within my personal tax allowance

- If my income is classed as being less than my personal allowance, how do I claim back any tax I have previously paid?

- If so, how would I make the most of my tax-free status in terms of interest from my current account and any savings I might be able to start?

Thank you in advance.

dreamtimetk

Can you advise gross pay in your part time job, tax code on your payslip, and the amount of tax paid so far?

margaretclare

No, a loan is not income, of course it isn't!

I don't know what applies now, best enquire of HMRC. When I was a student it was recognised that you couldn't earn enough to reach personal tax allowance levels so, effectively, you were tax-free. I worked night shifts for 14 weeks every summer, and I paid no tax on my earnings.

HTH

Margaret

Nicifer_noonoo

A loan IS classed as income if someone wants to claim benefits, so it could apply here.

Not much help, just thought I'd clarify.

CLAPTON

Student loans are not counted at taxable.

Your taxcode (see your payslip) should be 522L
This will automatically allow you to earn £5225 per annum before any tax is deducted.

If your total income (earning and gross interest but not loans or ISA interest) is less than 5225 then you need to register your saving interest to be paid gross by completing a R85 (obtainable at your bank or building society ) for each interest bearing account your have (except ISAs)

Willman_Rodders

Hi dreamtimetk,

As Clapton has pointed out you can earn up to £5,225 per year (from investment income, earnings etc) before paying tax (assuming your tax code is 522L).

If your total annual income is likely to be short of that you can complete form R85 - so that in future your interest on the nominated account or accounts will be paid gross. Complete form R85 for each savings account you have.

If, like my adult children, you intend to do holiday jobs (Christmas, Easter and Summer) you may find your income coming close to the tax threshold. You may also find yourself paying tax - at emergency code rate - if you take up another, secondary job, in addition to the one you have presently.


The thing to do is to make a diary note for mid April of each year to check how much income you have earned in total, and how much tax you have paid. If your income is below the tax threshold and you have paid tax then contact your tax office; they will advise what proof they need and arrange a refund.

If your income is greater than the tax threshold then you should check the tax calculation. By supplying details of your total income, tax paid, and your tax code either on this site (in which case someone will work it out for you) or by talking to the tax office (who will also work it out for you) you can see if a tax refund is due - and approach the taxman accordingly.

Is it worth looking back over the previous years? You may have paid tax unnecessarilly in the past.

jobbingmusician

OK, so the posts above have established that you have a probable tax code of 522.

The way the payroll department will normally calculate your tax is by your weekly/monthly earnings. The payroll department will normally assume that you are going to earn the same every week.

So let's assume you start a job in the Easter holidays, on April 5th, and work until the end of April earning £200 a week. You can see that a tax code of 522 will let you earn £100 a week tax free. You will have deductions made by the payroll department on the other £100 you earn each week, because it is the start of the tax year, and as far as they know you will be earning £200 a week all year.

However, let's assume that you give up this job after 4 weeks. You keep your P45 safe and in August you want to work again. Your P45 should tell your new employer that you have earnt £800 so far this year, and paid £88 in tax. (I have assumed 22% tax on the approx £400 you were taxed on. This isn't quite right as the first bit you earn is taxed at 10%, but will do for this illustration).

When you get paid at the end of August, let's assume for another 4 weeks at £200 pw, the payroll software will calculate that you have earned £1600 so far this tax year, paid £88 in tax BUT your tax free allowance until the end of August will be approx £2200 (approx 22 weeks at that tax-free allowance of approx £100 pw). So you wouldn't be taxed for that period - you have already been overtaxed. AFAIK your new company - or even the same company, if you have returned to the same employer - WON'T refund that £88 you paid - you will have to reclaim this at the end of the year.

It should also be clear from the above that if your FIRST period of employment for the tax year was in August, you would either pay no tax, or a very reduced tax bill (remember the software is assuming you are going to carry on working, and wants to even your tax bill out) in your first month.

Does that help to make things any clearer? Hope so.

CLAPTON

In your example, the august payroll WOULD in fact refund the £88...

Mikeyorks

jobbingmusician wrote: »

AFAIK your new company - or even the same company, if you have returned to the same employer - WON'T refund that £88 you paid - you will have to reclaim this at the end of the year.

In general terms the whole essence of the PAYE system is that it works on a cumulative basis. So, in the scenario you paint - the refund would be made on the first pay day after the P45 had been taken into consideration. It's more equitable ... and saves HMRC having to handle lots of refunds that the system can take care of itself. Where an employer has small numbers of employees and has to make a large refund that leaves them out of pocket .. HMRC make an advance to the employer, on request.

The normal exception, to the cumulative deductions / refunds, is if the code number (or no P45 was provided) is specifically (Week / Month 1) 'non-cumulative'. Usually where the correct code number is in course of being decided or there is an earlier year underpayment being collected.

jennifernil

Just being a student does not entitle you to any special treatment, it will all depend on what you earn.

Also, if you earn over a certain amount in a week or month, you will have to pay National Insurance, and you cannot claim that back at all.