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Tax
First thing's first. Question most asked is 'How much tax should I be paying?' The answer is here: http://listentotaxman.com
I'm asking for this to be made into a Sticky, but for the mean time I'm going to start adding information until this happens.
It would be great if everyone could contribute to this, hopefully it'll help clear up a lot of people's confusion! Plus it would make an ideal place for people to post tax questions.
Topics to cover can include:
This list isn't exhaustive either.
I'm asking for this to be made into a Sticky, but for the mean time I'm going to start adding information until this happens.
It would be great if everyone could contribute to this, hopefully it'll help clear up a lot of people's confusion! Plus it would make an ideal place for people to post tax questions.
Topics to cover can include:
•
How to claim back tax
•
Advice on forms: P38, P45, P46, P60 etc
•
ISAs
•
Tax advice for students
•
National Insurance contributions
This list isn't exhaustive either.
Scroll to see replies
All students who are RESIDENT in the UK will be liable for UK income tax at the same rate as everyone else!
You may be elligible to pay less tax if you are registered blind or are a pensioner. Most students don't pay income tax because they don't earn enough in a year to get hit by the tax man. If you are a non-blind student under the age of 65 you will start paying tax at 20% on earnings over £6035 in the 2008/09 tax year.
Students at work in the UK (abridged from HRMC.gov.uk)
Paying your taxes
If you work for someone else, your tax and National Insurance will be paid automatically. It comes straight out of your wages before you even receive them. This is known as PAYE (Pay As You Earn).
But you don't have to pay tax on everything. Everybody can earn a certain amount (known as the Personal Allowance) before they start paying tax.
Being self-employed
If you work for yourself, you obviously won't have an employer to sort out tax for you. However, you will normally fill in an annual tax return (declaring your profits and expenses) and this allows HMRC to work out how much you need to pay.
Holiday jobs
If you only work during the holidays, and you expect to earn no more than the personal allowance in the tax year ending 5 April, just ask your employer for a Form P38(S). Fill this in and you won't have any tax taken out of your wages.
If you already have a part-time job during term time, you won't be able to use this form just for your holiday job. You will already be 'on the system', so your employer will take care of the paperwork to make sure you don't pay too much tax.
You may be elligible to pay less tax if you are registered blind or are a pensioner. Most students don't pay income tax because they don't earn enough in a year to get hit by the tax man. If you are a non-blind student under the age of 65 you will start paying tax at 20% on earnings over £6035 in the 2008/09 tax year.
Students at work in the UK (abridged from HRMC.gov.uk)
Paying your taxes
If you work for someone else, your tax and National Insurance will be paid automatically. It comes straight out of your wages before you even receive them. This is known as PAYE (Pay As You Earn).
But you don't have to pay tax on everything. Everybody can earn a certain amount (known as the Personal Allowance) before they start paying tax.
Being self-employed
If you work for yourself, you obviously won't have an employer to sort out tax for you. However, you will normally fill in an annual tax return (declaring your profits and expenses) and this allows HMRC to work out how much you need to pay.
Holiday jobs
If you only work during the holidays, and you expect to earn no more than the personal allowance in the tax year ending 5 April, just ask your employer for a Form P38(S). Fill this in and you won't have any tax taken out of your wages.
If you already have a part-time job during term time, you won't be able to use this form just for your holiday job. You will already be 'on the system', so your employer will take care of the paperwork to make sure you don't pay too much tax.
Income Tax - Rates and allowances
http://www.hmrc.gov.uk/rates/it.htm
These change annually.
http://www.hmrc.gov.uk/rates/it.htm
These change annually.
Personal Allowance
Your personal allowance will be on any pay slip. It will be 3 numbers. This year mine (most peoples, and likely yours) wil be 543, your usually times this by 10 but this year its * 10 + 5
which means your personal allowance is £5435.
If you are on PAYE it means you can earn this before paying income tax:
Daily: £14.85
Weekly: £103.95
Bi-Weeky: £207.90
Monthly: Depends on the number of days!
*NB - your personal allowance is likely to change in September because of the 10p fiasco!*
Your personal allowance will be on any pay slip. It will be 3 numbers. This year mine (most peoples, and likely yours) wil be 543, your usually times this by 10 but this year its * 10 + 5
which means your personal allowance is £5435. If you are on PAYE it means you can earn this before paying income tax:
Daily: £14.85
Weekly: £103.95
Bi-Weeky: £207.90
Monthly: Depends on the number of days!
*NB - your personal allowance is likely to change in September because of the 10p fiasco!*
The Ps, The Rs - What the hell?
P38
This is a form which you want to fill in if you know you are going to be earning overall (the whole year) under your personal allowance, but maybe earn over every month. Say, a summer job where you earn £4k over 3 months, saves you paying tax then and having to claim it back in April
P45 and P46
The P45 is your End of Job certificate. It shows you have left your job and that you are no longer earning with that employer. The P46 is used if you lose your P45 (but try not to!!!).
It is recommended that you keep all your P45s.
P60
End of Year Certificate. This is what your employer should give you at the end of each tax year (April 5th). It can take a month or 2 to get you it but they have to give it to you by the end of May (somewhere around then!). If you want to claim tax back, you need this!
P38
This is a form which you want to fill in if you know you are going to be earning overall (the whole year) under your personal allowance, but maybe earn over every month. Say, a summer job where you earn £4k over 3 months, saves you paying tax then and having to claim it back in April
P45 and P46
The P45 is your End of Job certificate. It shows you have left your job and that you are no longer earning with that employer. The P46 is used if you lose your P45 (but try not to!!!).
It is recommended that you keep all your P45s.
P60
End of Year Certificate. This is what your employer should give you at the end of each tax year (April 5th). It can take a month or 2 to get you it but they have to give it to you by the end of May (somewhere around then!). If you want to claim tax back, you need this!
R40
If you know you have paid to much tax in the tax year, this is the form you need to get it all back.
You will also need your P60s as this will have the numbers you need to put on the form.
R85
If you have a savings account and you want tax free interest (only if you are earning under your personal allowance) then you can fill in an R85 form and send it to your bank. This means that any interest earnt in savings account will be tax free.
If your status changes (i.e. you earn over your personal allowance) you must inform your bank.
If you know you have paid to much tax in the tax year, this is the form you need to get it all back.
You will also need your P60s as this will have the numbers you need to put on the form.
R85
If you have a savings account and you want tax free interest (only if you are earning under your personal allowance) then you can fill in an R85 form and send it to your bank. This means that any interest earnt in savings account will be tax free.
If your status changes (i.e. you earn over your personal allowance) you must inform your bank.
ISA - What is it?
An ISA is like a wrapping paper on a present. The present being a savings account. It gives your tax free interest throughout your life, however, there are limitations.
There are 2 types of ISA wrappers; cash and stock and shares.
You can add £7200 into your ISAs each tax year. However, you are only allowed to put upto £3600 in your Cash ISA. (You can put £5000 in S&S, £2200 in Cash or £7200 in S&S and none in Cash, or £3600 in Cash and £3600 in S&S for example!)
There are plenty of ISAs around, you just have to find the best one that suits you.
Usually ISAs have a resonble rate, there are some savings accounts which have higher rates, but tax will knock that rate down.
If you are a student and are earning under your personal allowance you must think if you want to have savings on short term or long term. If you are planning on keeping the savings when you are working (over your personal allowance) then an ISA is the way to go. Otherwise a high rate savings account and an R85 form is all you need.
An ISA is like a wrapping paper on a present. The present being a savings account. It gives your tax free interest throughout your life, however, there are limitations.
There are 2 types of ISA wrappers; cash and stock and shares.
You can add £7200 into your ISAs each tax year. However, you are only allowed to put upto £3600 in your Cash ISA. (You can put £5000 in S&S, £2200 in Cash or £7200 in S&S and none in Cash, or £3600 in Cash and £3600 in S&S for example!)
There are plenty of ISAs around, you just have to find the best one that suits you.
Usually ISAs have a resonble rate, there are some savings accounts which have higher rates, but tax will knock that rate down.
If you are a student and are earning under your personal allowance you must think if you want to have savings on short term or long term. If you are planning on keeping the savings when you are working (over your personal allowance) then an ISA is the way to go. Otherwise a high rate savings account and an R85 form is all you need.
Claiming back tax at the end of a tax year
Sometime after the end of a tax year (5th April) you should recieve a P60 (see above) from your employer. This will show how much you've been paid and how much tax you've paid. It is a good idea to check this amount against your own calculations (see http://www.hmrc.gov.uk/rates/it.htm).
If you have over paid tax you will be entitled to a refund. There is a fantastic resource for calculating your liability on this website: http://listentotaxman.com/
Remember that most of your income will be liable to tax, this includes Tips and bonuses!.
Photocopy your P60 and then send the original with a covering letter to your tax office requesting a refund. It's also a good idea to ring your tax office first to check that they're happy for you to do this and that you're actually sending it to the right office.
Sometime after the end of a tax year (5th April) you should recieve a P60 (see above) from your employer. This will show how much you've been paid and how much tax you've paid. It is a good idea to check this amount against your own calculations (see http://www.hmrc.gov.uk/rates/it.htm).
If you have over paid tax you will be entitled to a refund. There is a fantastic resource for calculating your liability on this website: http://listentotaxman.com/
Remember that most of your income will be liable to tax, this includes Tips and bonuses!.
Photocopy your P60 and then send the original with a covering letter to your tax office requesting a refund. It's also a good idea to ring your tax office first to check that they're happy for you to do this and that you're actually sending it to the right office.
Orthala
Personal Allowance
Your personal allowance will be on any pay slip. It will be 3 numbers. This year mine (most peoples, and likely yours) wil be 543, your usually times this by 10 but this year its * 10 + 5 which means your personal allowance is £5435.
If you are on PAYE it means you can earn this before paying income tax:
Daily: £14.85
Weekly: £103.95
Bi-Weeky: £207.90
Monthly: Depends on the number of days!
*NB - your personal allowance is likely to change in September because of the 10p fiasco!*
Your personal allowance will be on any pay slip. It will be 3 numbers. This year mine (most peoples, and likely yours) wil be 543, your usually times this by 10 but this year its * 10 + 5
which means your personal allowance is £5435. If you are on PAYE it means you can earn this before paying income tax:
Daily: £14.85
Weekly: £103.95
Bi-Weeky: £207.90
Monthly: Depends on the number of days!
*NB - your personal allowance is likely to change in September because of the 10p fiasco!*
What is the 10p fiasco?
The 10 and 22 % tax bands were removed this year and replace with a 20% flat band; this caused a bit of an uproar because the people earning within a certain bracket ended up paying more income tax.
10% equates to 10p in the pound.
10% equates to 10p in the pound.
guardian.co.uk
"Who is affected by the abolition of the 10p tax rate?
There are several types of losers. First, there are childless, single people earning between £5,435 and £19,355 a year and ineligible for working tax credits because they are under 25.
Part-time workers who clock up fewer than 30 hours a week are also hit by the cut because they do not qualify for working tax credits either.
Then there are the early retirees, who do not receive tax credits, but who are too young to benefit from the increase in the tax allowance for those aged 65 and over.
The winners, most noticeably, are people earning between £19,355 and around £40,000. Others to benefit from the changes are those earning under the £19,355 threshold who have young children and are therefore eligible for higher personal allowances, or are over 65 and qualify for higher personal allowances."
http://www.guardian.co.uk/politics/2008/apr/21/economy.labour
There are several types of losers. First, there are childless, single people earning between £5,435 and £19,355 a year and ineligible for working tax credits because they are under 25.
Part-time workers who clock up fewer than 30 hours a week are also hit by the cut because they do not qualify for working tax credits either.
Then there are the early retirees, who do not receive tax credits, but who are too young to benefit from the increase in the tax allowance for those aged 65 and over.
The winners, most noticeably, are people earning between £19,355 and around £40,000. Others to benefit from the changes are those earning under the £19,355 threshold who have young children and are therefore eligible for higher personal allowances, or are over 65 and qualify for higher personal allowances."
http://www.guardian.co.uk/politics/2008/apr/21/economy.labour
Good idea. Personally I'd settle for an empty sticky whose subject said "STUDENTS DO PAY INCOME TAX FFS!!"
GR29KHS
The 10 and 22 % tax bands were removed this year and replace with a 20% flat band; this caused a bit of an uproar because the people earning within a certain bracket ended up paying more income tax.
10% equates to 10p in the pound.
10% equates to 10p in the pound.
THX!
National Insurance Contributions
http://www.hmrc.gov.uk/nic/background-nic.htm
"Anyone who is aged between 16 and state pension age – currently 60 for a woman and 65 for a man - may have a liability to pay National Insurance contributions.
The amount of contributions you have to pay will depend on whether you are an employed earner or self employed; and the amount you earn. There may be occasions when you may work for an employer and for yourself at the same time. In these instances you may have to pay more than one class of contribution.
Someone who is not liable to pay National Insurance contributions may be able to pay certain contributions on a voluntary basis (normally Class 3).
Abridged from HMRC.gov.uk
http://www.hmrc.gov.uk/nic/background-nic.htm
"Anyone who is aged between 16 and state pension age – currently 60 for a woman and 65 for a man - may have a liability to pay National Insurance contributions.
The amount of contributions you have to pay will depend on whether you are an employed earner or self employed; and the amount you earn. There may be occasions when you may work for an employer and for yourself at the same time. In these instances you may have to pay more than one class of contribution.
Someone who is not liable to pay National Insurance contributions may be able to pay certain contributions on a voluntary basis (normally Class 3).
Abridged from HMRC.gov.uk
Refund of National Insurance Contributions
http://www.hmrc.gov.uk/nic/refund-nic.htm
Class 1 and Class 2 National Insurance contributions
If you are employed or you are both employed and self-employed there are National Insurance rates above which you are not required to pay any further contributions.
If you have paid £38.50 or more above your Class 1 and 2 maximum, you will normally be notified by HM Revenue & Customs, National Insurance contributions Office, who will invite you to apply for a refund of the overpaid contributions.
The Class 1 and 2 maximum and refund arrangements apply to employee contributions only. There is no maximum for employer contributions.
If you think that you are due a refund of overpaid Class 1 and 2 contributions you can write to:
HM Revenue & Customs
National Insurance Contributions Office
Refunds Group
Benton Park View
Newcastle upon Tyne
NE98 1ZZ
as soon as the tax year ends. You should send with your request evidence of how much Class 1 contributions you have paid, for example:
You should also send evidence of the Class 2 contributions that you have paid for example your quarterly bill receipt.
If, after you have paid Class 4 contributions you think that you may have paid too much you should write to:
HM Revenue & Customs
National Insurance Contributions Office
Deferment Services
Benton Park View
Newcastle upon Tyne
NE98 1ZZ
Deferment Services will check how much Class 1, 2 and 4 contributions you have paid and they will send you a refund application form CA5610. You should be aware that a refund for Class 4 contributions cannot be claimed until the Class 4 self-assessment for the year in question has been finalised and fully paid.
If you think that you pay above the National Insurance rates you should consider applying to defer some of the contribution liability.
Refunds of Class 1 and 2 contributions are not made if the amount to be refunded is less than £3.71. Refunds of Class 4 contributions are not made if they are below £0.50.
Voluntary Class 2 and Class 3 National Insurance contributions
If you are paying voluntary Class 2 or Class 3 National Insurance contributions and:
and you think you are due a refund, you should be aware that the Government has published a White Paper titled “Security in retirement: towards a new pensions system (Cm 6841)” setting out its proposals on Pension Reform. Therefore, before you make any decisions to receive a refund of voluntary contributions you must read the important information carefully.
Abridged from HRMC.gov.uk
http://www.hmrc.gov.uk/nic/refund-nic.htm
•
Class 1 and Class 2 National Insurance contributions
•
Voluntary Class 3 and Class 3 National Insurance contributions
Class 1 and Class 2 National Insurance contributions
If you are employed or you are both employed and self-employed there are National Insurance rates above which you are not required to pay any further contributions.
If you have paid £38.50 or more above your Class 1 and 2 maximum, you will normally be notified by HM Revenue & Customs, National Insurance contributions Office, who will invite you to apply for a refund of the overpaid contributions.
The Class 1 and 2 maximum and refund arrangements apply to employee contributions only. There is no maximum for employer contributions.
If you think that you are due a refund of overpaid Class 1 and 2 contributions you can write to:
HM Revenue & Customs
National Insurance Contributions Office
Refunds Group
Benton Park View
Newcastle upon Tyne
NE98 1ZZ
as soon as the tax year ends. You should send with your request evidence of how much Class 1 contributions you have paid, for example:
•
form P60
•
statements from your employers which show the categories and amounts of National Insurance contributions deducted from the pay you received during the tax year
You should also send evidence of the Class 2 contributions that you have paid for example your quarterly bill receipt.
If, after you have paid Class 4 contributions you think that you may have paid too much you should write to:
HM Revenue & Customs
National Insurance Contributions Office
Deferment Services
Benton Park View
Newcastle upon Tyne
NE98 1ZZ
Deferment Services will check how much Class 1, 2 and 4 contributions you have paid and they will send you a refund application form CA5610. You should be aware that a refund for Class 4 contributions cannot be claimed until the Class 4 self-assessment for the year in question has been finalised and fully paid.
If you think that you pay above the National Insurance rates you should consider applying to defer some of the contribution liability.
Refunds of Class 1 and 2 contributions are not made if the amount to be refunded is less than £3.71. Refunds of Class 4 contributions are not made if they are below £0.50.
Voluntary Class 2 and Class 3 National Insurance contributions
If you are paying voluntary Class 2 or Class 3 National Insurance contributions and:
•
you have paid them in error, or
•
you have paid them for part of the tax year;
and you think you are due a refund, you should be aware that the Government has published a White Paper titled “Security in retirement: towards a new pensions system (Cm 6841)” setting out its proposals on Pension Reform. Therefore, before you make any decisions to receive a refund of voluntary contributions you must read the important information carefully.
Abridged from HRMC.gov.uk
I'd stick the Listen to Tax Man link in http://listentotaxman.com/
It's updated every year and also allows for student loan repayments now
It's updated every year and also allows for student loan repayments now
Related discussions
- Autumn Budget
- for what reason am i paying tax?
- Twitch affiliate taxes as a 17 year old.
- tax code help?
- What are these 10 taxes that will go up?
- Tax
- Paychecks at work
- How to pay income tax as a Sixth Form Student? (Finance Help PLS)
- can someone please review my LNAT section B Practice essay? would be very helpful!!
- Student finance tax year help!
- paid too much tax?
- Tax
- I Earn £466.94 each week how much will I earn each year
- [Deleted]
- Possibly abolishing single persons council tax discount
- economics 25 marker paragraph feedback
- Tax
- Current year assessment
- Taxes Question
- Car tax
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