University Advice ❱❱ Student Tax: Everything You Need to Know

Student Tax: Everything You Need to Know

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Tax is an unfortunate construct of our society, and certainly the man who invented tax is enjoying his very own suite in the deepest circles of hell, however, that doesn’t stop it being one of the most important things in our society today.

The ramifications involved with the breaking of tax laws can be incredibly serious; many people find themselves running afoul of tax, in fact, Chicago mobster Al Capone was arrested and eventually imprisoned for his tax situation. In the immortal words of Saul Goodman, “If they can get Capone, they can get you”.

But tax is a complicated thing, and something that if you don’t understand, you need to speak to a professional, be it a member of your bank, or to an accountant, ignorance of the law will not wash, unfortunately. Luckily, we’ve got some facts and figures surrounding student tax for you to help you out, these can help you out even if you’re studying an Accounting degree.

When Do I Start Paying Tax?

You’ll start paying taxes as soon as soon as you are earning over the personal allowance figure that is representative in the UK at that point. Everyone in the UK will have to pay tax at some point in their lives. The rates can change from year-to-year, with the rate depending on various socio-economic factors affecting the country at that time; however, at the moment, the minimum earning wage to pay tax in the UK is £11,500 – after that you will enter a higher tax bracket, if you earn over a certain amount, which at the moment is set at £33,500. If you earn over the £11,500 bracket, you will have to pay a basic tax rate on everything you earn over that amount.

While working a part-time job while studying at university or if you decide on getting a job whilst doing your GCSEs, you will be in a different tax bracket, so you will not be taxed. Although, if you work full-time over a period of time, perhaps over the summer when summer university term is in full flow, you may be taxed as you will be working full-time hours, likely to be earning a taxable income. Not to worry, you’ll be able to claim this tax back, which is explained below. It’s important how to manage working and studying; both are very important to you, so it is essential you find the right balance.

What is the Basic Tax Rate in the UK?

The basic tax rate in the UK at the moment stands at 20%. Which means if you’re earning over £11,500 but under £33,500, you will pay 20%. For example: if you earn £22,700-a-year, you will pay £4,540 overall in tax that year, which will work out at £378.33-a-month. This will, of course, change depending on the wage bracket that you qualify for.

Is All Income in the UK Taxed?

No. Despite the horrible laws surrounding the boring world of tax, not everything is taxable. For instance, your wages, any state benefits you receive, some bank accounts and any Job Seeker’s Allowance that you happen to be claiming, will be taxed; however, your student finance package, any bursaries, grants, scholarships, Child Tax Credits or Disability Living Allowance or any ISA Allowances (See more below) that you have are non-taxable. A useful tip for you is that when applying for any means-tested funds, like student finance, you only need to declare taxable income!

Can I Reclaim Overpaid Tax or National Insurance Contributions?

Yes, you can, you lucky little so-and-so. To do this, you will need to keep an eye on your payslips, though. If you’ve noticed that you’ve been overcharged, then you will need to get in touch with Her Majesty’s Revenue and Customs and let them know or ask them to investigate. If you are entitled to money back, they will reimburse you as soon as possible.

What is a Tax Rebate?

While the idea of having children is certainly up there, a tax rebate is, of course, the greatest a person can experience. Okay, that might be a bit of an overstatement, but it is certainly a welcome surprise for everyone! A Tax Rebate is where the government reimburses your tax that you’ve overpaid, in the form of a cheque. You will often see that you will get rebates once or twice every two years or so if you’re changing jobs, but overall, you will see a tax rebate every so often, depending on your job and your contributions. It’s best to (As we said above) keep an eye on your payslips and see if you are due one, but the government will let you know if you aren’t.

Do I Still Have to Pay Tax If I am Self-Employed?

You will still have to pay tax, even if you’re self-employed. You can be entitled to pay less tax if you’re self-employed, but this is all dependent on a couple of factors for the business itself. Only profits can actually count towards your overall personal allowance. Profits, are obviously worked out by the money that the business (Or you) have earned and then take away the overall running costs of the business. Don’t try and be sneaky though, any money that you personally invest into your company is still very much your money. If you think that over-investing will help to save on tax, you’re wildly mistaken.

Why Does an ISA Help Me with My Tax?

Well, an ISA stands for Individual Savings Account. What you need to be aware of is that banks automatically tax interest on any and all bank accounts that you have, before any money even enters the account. The best thing to do is to open an ISA, which can allow up to £20,000 to go into the account and remain tax-free, year-after-year. It’s a perfect account for students, especially as it now means that you don’t have to pay any tax and it means that you can keep topping up your ISA all the time!  

If I Earn Money from Overseas, Do I Still Have to Pay Tax?

Pump your breaks there, slick! You will indeed have to pay tax on any money earned abroad. What’s more is that you won’t just pay tax in the UK, you’re also quite likely to pay tax in other countries, too! That’s always nice, isn’t it? You might want to do some research into any tax treaties first as well, just to make sure that you’re not paying tax twice.

Is Cash Tax-Free?

Not in this world, if you believe in the multiverse theory, there may be a universe where that’s true, but not this one. Employers cannot pay you in cash. Many employers will have employees sign contracts to say that they are self-employed, this removes the burden of sorting out the tax and national insurance contributions for the employees and leaves it up to them themselves, it will also most likely mean that you are paid in cash, if that is the case, you need to seek tax advice immediately, you don’t want to be caught out! A good idea is to keep a note of all of your cash incomings and outgoings and be prepared for the tax man to do some invasive digging.

So there you have it! The boring, tops-survey and frustratingly complicated world of tax. Remember to keep an eye on things when you’re at university, don’t miss out on payslips, always read them and don’t allow yourself to be caught out on your tax, you don’t want to be the next Al Capone, or be ridiculed like Jimmy Carr!


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