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A Basic Tax Guide for Students
The UK tax system is a complicated lot, but something you must understand if you study and work at the same time during your studies.
This is because there are different types of income that may be liable for student tax. Even the money your family sends you, or that income from your savings account may be taxable. So it pays to read and learn as much as you can about tax tips for students.
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UK Tax Overview
There are different taxes that HM Revenue & Customs (HMRC) collects, such as income tax, corporation tax, inheritance tax, and capital gains tax, all of which are considered direct taxes. Indirect taxes, on the other hand, include value added tax – also known as VAT (Value Added Tax)!
Student Tax Calculation
To identify how much tax you will pay on your income, you need to know your tax-free personal allowance, which is £11,500 for the tax year 6 April 2016 to 5 April 2017, and the other work-related expenses that are taxable. If you earn less than the personal allowance, you may be taxed 0%. Otherwise, you will be taxed at 20%, 40% and 45%, depending on your income over the personal allowance. But for most students, you’ll be taxed at 20%.
Income that are non-taxable or tax-free
Some state benefits are exempt from tax, such as Universal Credit, housing benefit, disability benefits, and benefits during time out of study. State benefits vary, depending on whether or not you are a full-time or part-time student.
Foreign students in the UK should seek out professional advice or credible tax guide for students to ensure that no immigration conditions are breached.
Non-savings income, such as educational grants or scholarships, are tax free, when confirmed in writing by the donor. Certain employer-sponsored sources may be partially non-taxable. Income on National Savings and Investments, Individual Savings Accounts, insurance policies or investment bonds, from Save As You Earn
Schemes, and overseas income not brought into the UK are full or partly tax exempt.
Tax Collection Procedure
Student tax may be collected through the PAYE system, if you are employed, and paid direct to HMRC, if you are self-employed. A different process will be used when collecting taxes from pensions, bank and building society interest, UK dividends and rental property income.
Tax Refunds for Students
If you think you have overpaid tax, you may be eligible for a tax rebate. If you want to claim back tax you must furnish the required information and documents.
These include:
- P60 and/or P45 from an employer
- P11D from an employer
- Details of taxable state benefits received
- Bank statements or certificates of tax deducted (before the 2016/17 tax year)
- Building society statements or certificates of tax deducted (before the 2016/17 tax year)
- Dividend certificates, and details of rental income and
expenses
Make sure to prepare everything that applies to your particular circumstances.
It is also important that you apply for a tax refund within the time limits. For example – the tax year 2013/14 (year ended 5 April 2014), you must claim by 5 April 2018.
For more information about student tax and the UK tax system in general speak to one of our advisors and find out if you’re owed a Student Tax Refund.
Think you may be due a tax refund? Apply here to get your tax back.