WHAT IS INCOME TAX?
Everyone who earns above a certain amount during the Tax Year (this runs from April 6th of one year to April 5th of the following year) is required to pay Income Tax. If you are employed, tax is normally deducted from your earnings each time you are paid under the PAYE (Pay As You Earn) system. When you reach the earnings threshold, you will begin to pay tax at the basic rate.
WHEN WILL I START TO PAY TAX?
You will pay tax immediately (not after you have earned your personal allowance) if your pay is expected to be over the threshold because tax deductions are spread over the year according to your weekly earnings. Any overpaid tax can be claimed back at the end of the tax year.
STUDENT EXEMPTION FORMS P38(S)
This form is only used during holiday periods. If you think your income in the whole of the tax year is likely to be less than the basic personal allowance you should request a P38(s) form, fill it in, sign it and return it to your employer. Your employer is then able to pay you without deducting tax.
DO I PAY NATIONAL INSURANCE CONTRIBUTIONS?
Unlike Income Tax, National Insurance Contributions are non-cumulative, and as a consequence contributions are deducted any time your pay exceeds the threshold.
WHAT IF I DO A WORK PLACEMENT?
The pay you receive on your placement or period of practical experience is taxable as earned income, subject to the usual allowances mentioned above.
WHAT ABOUT TAX CREDITS?
If you have children or are disabled then you may be able to claim Tax Credits. These tax credits can be complicated, so it is recommended that you seek further advice from us based on your individual circumstances, further details can be seen
For more information, see the government's Income Tax webpage.