Tax question - this summer... Watch

optimisticasateen
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Ok, so I'm sorry if this is basic stuff, but I'm due to start my summer job next week, have just left sixth form at school and I'm starting at Edinburgh uni in september, and I wondered what my status was regarding tax on my earnings this summer, i.e. do I have to pay any? Hoping that I still count as being in full time education, but I'm doubtful... Can anyone advise me? Thanks.
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snu
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Being in full time education has nothing to do with paying tax. Everybody, student or not, has a personal allowance which is exempt from income tax. If you are going to earn less than this, there is a form you can fill out ensure you are not taxed directly out of your wages, otherwise you will have to claim it back.
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Illusionary
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While you may remain within your allowance for income tax in the year, if you earn above £105 in any week, you'll have to pay National Insurance Contributions (that limit applies on a weekly, not annual, basis).
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DannyOwens
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SNU, im afraid that you are wrong in that department! Students have tax exemption if they only work during vacation time. If you can earn £15k in vacations if you are THAT good and they can't tax you...

But, you will have to pay tax over the summer and if u earn under £5000 ish then you will get a rebate in the form of a cheque at the end of april 09.
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suek
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(Original post by DannyOwens)
SNU, im afraid that you are wrong in that department! Students have tax exemption if they only work during vacation time. If you can earn £15k in vacations if you are THAT good and they can't tax you...

But, you will have to pay tax over the summer and if u earn under £5000 ish then you will get a rebate in the form of a cheque at the end of april 09.
Sorry, but you are incorrect. Students are NEVER exempt from tax.

You are getting confused - if students are only employed in Summer, Christmas & Easter holidays, they are eligible for receiving their pay without tax being deducted in the first place.

Any student who earns over the allowance in a financial year (currently at £5435) has to pay income tax, regardless of when they actually work!
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Illusionary
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(Original post by suek)
Sorry, but you are incorrect. Students are NEVER exempt from tax.

You are getting confused - if students are only employed in Summer, Christmas & Easter holidays, they are eligible for receiving their pay without tax being deducted in the first place.

Any student who earns over the allowance in a financial year (currently at £5435) has to pay income tax, regardless of when they actually work!
:ditto:
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DannyOwens
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So... pay without tax deduction is not exemption?? I earned £6300 last summer as a student in the vacations, submitted all my tax paperwork as i was PAYE and didnt get taxed a penny...
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suek
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(Original post by DannyOwens)
So... pay without tax deduction is not exemption?? I earned £6300 last summer as a student in the vacations, submitted all my tax paperwork as i was PAYE and didnt get taxed a penny...
No, it's not.

If you work outside Easter, Summer and Christmas, your tax is deducted from your pay as you get paid. You then have to claim the tax you paid back, if you are under the allowance.

If you only work inside Easter, Summer and christmas holidays, you can fill in a form to make sure your tax doesn't come off your pay directly.

Since you were "PAYE" (Pay As You Earn), there's a very good chance you were, in fact, paying tax out of the money you earnt (it seems obvious you didn't fill in the paperwork to stop this happening), that's generally how it works and it's often detailed on your payslip...

You just didn't have a tax bill at the end of it because you had already paid it...


Maybe this will shed a little light:

What is the Pay As You Earn (PAYE) system

The Pay As You Earn (PAYE) system is a method of paying income tax. Your taxpayer’s employer deducts tax from your wages or occupational pension before paying you your wages. Wages includes sick pay and maternity pay. This means that you pay tax over the whole year, each time you are paid. Your employer is responsible for sending the tax on to HM Revenue and Customs (HMRC).

If you pay tax on your wages or occupational pension under PAYE, the PAYE system can also be used to collect the income tax of any other taxable income you have. For example, if you pay tax under PAYE on an occupational pension, the tax due on your state retirement pension is collected through PAYE by deducting tax from your occupational pension.
From http://www.adviceguide.org.uk/index/...aye_system.htm
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DannyOwens
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I think you misunderstand - i worked for 2 years at a finance broker and worked in the accounts department (which handled payroll!) - so i fully understand PAYE and how it works, i also keep all my payslips and i know that since i started uni, when i have and haven't paid tax and exactly how much i have to claim back to date at the end of the year!

Yes, you fill in a form (as i did) so that Tax isn't taken off your salary, therefore when the Payroll is processed u are put on a tax exemption code (i dont know what it is this year im afraid). - so by the fact you are on an exemption code, im gonna use a bit of intuition and suggest that if you only work vacations, you are tax exempt.

By submission of paperwork i meant to the family accountant who keeps it all safe and makes sure that its all in order!

IN SUMMARY: if you are a student and you only work during the vacation periods, you fill in P38(s) form at the start of your employment and tax will not be deducted... (use which ever vocab you please)
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Illusionary
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(Original post by DannyOwens)
I think you misunderstand - i worked for 2 years at a finance broker and worked in the accounts department (which handled payroll!) - so i fully understand PAYE and how it works, i also keep all my payslips and i know that since i started uni, when i have and haven't paid tax and exactly how much i have to claim back to date at the end of the year!

Yes, you fill in a form (as i did) so that Tax isn't taken off your salary, therefore when the Payroll is processed u are put on a tax exemption code (i dont know what it is this year im afraid). - so by the fact you are on an exemption code, im gonna use a bit of intuition and suggest that if you only work vacations, you are tax exempt.

By submission of paperwork i meant to the family accountant who keeps it all safe and makes sure that its all in order!

IN SUMMARY: if you are a student and you only work during the vacation periods, you fill in P38(s) form at the start of your employment and tax will not be deducted... (use which ever vocab you please)
I'm afraid that if you've earned above the annual Personal Allowance in any tax year (£5,435 this year, £5,225 last year), and you've not paid any Income Tax, then you'll almost certainly have an outstanding tax liability, which you need to get sorted ASAP. You won't get a much more definitive source than this, straight from HMRC:

http://www.hmrc.gov.uk/paye/employee-student.htm
Holiday-only employment for students on UK-based courses

If a student on a UK-based course only works for you during their holiday periods, and as long as their earnings remain below their Personal Allowance for the tax year, you can pay them without deducting PAYE tax.
Form P38(S)

To pay a student without deducting PAYE tax, you first need to obtain a form P38(S). The student must fill in the declaration on the form as soon as they begin working for you.

You should only complete the employer's statement on the P38(S) either when the student's period of employment with you ends, or at the end of the tax year on April 5 if that date falls during the Easter holidays and the student continues working beyond it.

You will need to obtain and complete a new form P38(S) for each tax year that a student works for you.
http://www.hmrc.gov.uk/students/doi_...pt_job_9_2.htm
Students: Do I have to pay tax on my part-time job?

Whether or not you pay tax on your part-time job depends on how much you earn, not on the number of hours you work. Everyone receives a certain amount of income in each tax year on which no tax has to be paid. This is called the Personal Allowance (£5,035 in 2006/2007). If your earnings from your part-time job are below this, then you do not have to pay tax on them. If your earnings are more than this, you will pay tax on the difference.
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DannyOwens
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Well, hey ho, its only on a grand... if they claim it they can have it... but my accountant signed it off.
Actually, i had expenses claims of about £900 (i used to travel and entertain a lot), and i know that is tax exempt.. so its about £100. Actually i know why i'm not - it's just dawned on me...

I worked for 3 months starting April 1st 2007 paying tax and then went tax exempt, so the tax liability may have been settled through my rebate...

I'll wait and see .
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suek
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Even so, the point remains - students are not exempt from paying tax, if they earn above the threshold, regardless of when they work.
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optimisticasateen
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Wow, that's a whole lot of tax-jargon... think I got the jist of it though. So basically I need to get my hands on a P38, right? Thanks guys!
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GR29KHS
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Gah, there's a group on facebook where members of the armed forces are wingeing at students because they 'don't pay tax' and it really, really annoys me! I paid tax when I was at uni because my earnings were over the p.a. for the first 2 years (I've also just finished a 2 year stint in the RAF so this is nothing against the armed forces, just a moan at general ignorance). I also did finance at uni and am training to be a financial adviser and I can say without a shadow of a doubt that students are NOT exempt from tax if they earn over the p.a.

I'm going to suggest a tax sticky as there's usually a thread every few days asking how to claim back tax and it also seems that a lot of students think they don't pay it. If anyone disagrees tell me now, otherwise I'll put it to the mods.
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snu
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(Original post by DannyOwens)
So... pay without tax deduction is not exemption??
Not really, no. The same amount of tax is due in the end, whether you are a student or not. That is the fundamental point of interest.
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snu
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(Original post by DannyOwens)
Actually, i had expenses claims of about £900 (i used to travel and entertain a lot), and i know that is tax exempt.. so its about £100.
Entertaining clients is not a tax-deductible expense.
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DannyOwens
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thats what i said...
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snu
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(Original post by DannyOwens)
thats what i said...
No, it's the opposite of what you said.
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DannyOwens
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exemption and non -tax deductible = i class these as the same. Either way, no tax is charged...

Bored now....
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Illusionary
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(Original post by DannyOwens)
exemption and non -tax deductible = i class these as the same. Either way, no tax is charged...
You misunderstand the term "non-deductible" - it means that you can't deduct the cost of entertaining clients from your total income when determining what amount you pay tax on. So, if you have:

Income = £100
Entertaining costs = (£20)
Net income, after entertaining = £80

You'd pay tax on the initial £100, not on the £80.
With a tax rate of 20%, say, you'd pay tax of 20%×£100 = £20, and not 20%×£80 = £16.
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