Income Tax and National Insurance
As a student, you may need to support your studies financially by undertaking paid work. As a consequence of this, you may be eligible for paying National Insurance (NI) and Income Tax. These costs are calculated based on your income. As a student you are not exempt from paying National Insurance or Income Tax.
Income Tax
Income Tax is a tax paid on income, calculated as a percentage of that income, and is used to part fund government expenditure.
All UK residents have a personal allowance, which is tax-free income. If you earn more than the specified amount of tax-free income, you may be eligible to pay Income Tax on all the money that you earn above this allowance.
Income from Student loans, Grants, Scholarships, Bursaries and Research Awards, is not taxable.
You can find out more about the specific bands of income tax of the Gov.uk website:
If you are living and working at home elsewhere in the UK, you can find out about the income tax bands that apply to you here:
If you are an international student, you may still be expected to pay Income Tax. Find out if this applies to you here.
National Insurance
National Insurance is a tax on earnings, that is paid by both the employee and employer, and is used to part fund state benefits, this includes, but is not limited to:
- the NHS;
- Statutory sick pay;
- State pensions.
By consistently contributing to National Insurance, you may be entitled to state benefits, such as a state pension when you retire.
How do I pay NI or Income Tax?
Your National Insurance and Income Tax is likely to be deducted by your employer through PAYE (pay as you earn).
If you are a UK resident, you should receive a National Insurance number from HMRC around the time that you turn 16. HMRC (Her Majesties Revenue and Customs) is responsible for the collection of taxes, issuing national insurance numbers and the payment of some forms of state support.
Once you start employment, HMRC will generate a tax code for you, which helps employers calculate the amount of tax you are required to pay.
When you leave a job, you should be given a P45 containing your tax code. You may want to present this to your next employer to speed up this process.
Your national insurance number can be used to ensure that all your NI and tax contributions are recorded against your name.
If you are self-employed, you may need to pay NI and Income Tax through Self-Assessment. This can be a complex process and we would advise you to seek the appropriate advice and guidance.
I think I’ve paid too much tax. How can I get this money back?
At the end of each financial year, you should be given a P60 from your employer. This will tell you how much tax you have paid in total over the last 12 months.
If you do not want to wait until the end of the financial year, you can estimate how much income tax you should be paying using this tool of the Gov.uk website.
If your circumstances change, you may find that you have paid too much Income Tax. If you have paid too much tax you may be eligible for a tax refund which you may be able to claim here.
What happens if I don’t pay tax or NI?
If you fail to pay your NI you will be fined by HMRC.
If you fail to pay you tax bill HMRC may take the following actions:
- Collect what you owe through your earnings or pension;
- Collect the money via a debt collection agency;
- Take things you own and sell them (if you live in England, Wales or Northern Ireland);
- Take money directly from your bank account or building society (if you live in England Wales or Northern Ireland);
- Take legal action;
- Make you bankrupt or close down your business.