Tax Changes for Students with Summer Jobs

The tax authorities have scrapped the P38(S) form which allowed students working only in their holidays to ask their employer not to take tax off their wages. Students may find that they are earning significantly less than the threshold at which tax is supposed to begin- £9,440, yet still see tax deducted.

Most young people will have a tax code 944L, which indicates they are exempt from paying PAYE tax until they earn more than £9,440. Sadly this does not mean you can earn £9,439 and then start paying tax, instead it means your employer will give you one-twelfth of the allowance every month you work for them.

For example, if you work full time and earn £6.19 an hour (The current basic minimum wage for 21’s and over), that could add up to about £1,070 a month. Your payslip will give you the first £786 tax free (One twelfth of £9,440) then make you pay tax at 20% on the remainder- about £57 a month.

Further more, if you work two jobs, you don’t get two personal allowances, just one, and there is a risk that one of the jobs will deduct 20% tax on everything you earn. To avoid this you can ask HMRC to split your tax code between both jobs.

However you can get the income tax back. P45 and P60 forms are crucial in reclaiming overpaid tax. If you continue in paid employment during term time then you will have to wait until the end of the tax year, 5 April 2014, to put in a claim for over paid tax. You have to write to HMRC setting out details of your employment history during the year. You will also need to send in either your P60 or your P45. If you work over summer and are not going to work over term time, you can reclaim the income tax paid at the summer job by filling in the form, P50, although not until you have stopped work for four weeks and can declare you won’t work again.

If you think your tax code is wrong or believe you have paid too much tax, you can call HMRC’s helpline. Or alternatively to take advantage of a FREE initial meeting contact us on 01869 277973.

Further details on this topic can be found on the guardian website;

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