BEWARE A SUMMER TAX BILL

Students working this summer to fund their studies need to keep a close eye on the tax they pay or they could end up unfairly out of pocket.

Caroline Miskin, a tax faculty manager at the Institute of Chartered Accountants in England and Wales, says: “It is very easy for students to overpay tax. The system in the UK can quickly become complicated, particularly if you go on a placement year or work part-time during university.

“While the majority of part-time employees will earn less than the tax-free personal allowance, the tax code applied may mean you pay more than you should.

“It’s important for students to be aware of how much tax they are required to pay, and how to go about claiming a refund should they overpay.”

Summer jobs

You only have to pay income tax on earnings above the personal allowance, which is £11,500 for the 2017/18 tax year.

If you have a summer job for 10 weeks, paying £300 a week, and this is your only paid work this tax year, your total earnings will be £3,000. That’s under the £11,500 threshold so you should not pay any tax.

PAYE may automatically be deducted from your income and you would then need to reclaim that from HM Revenue and Customs at gov.uk/personal-tax-account, or by calling 0300 200 3300.

Make sure you get a P45 from your employer when you finish working so you can pass that on to any new employer.

You will, however, have to pay 12% National Insurance contributions.

The £300 is above the £157-a-week threshold for NIC. You are not entitled to claim this back.

If you have an ongoing part-time job or various jobs during any tax year, you will pay 20% tax on income earned above the £11,500 threshold.