Students: working in term time and the holidays

Income Tax

When you leave a job, your employer should give you a P45. Give this to your new employer.

If you do not have a form P45 your new employer will complete a Starter Checklist or ask you relevant information before your first pay day to tell HM Revenue & Customs (HMRC) that you have started work with them. You can complete and print a copy of the Starter Checklist by following the link below. Give it to your employer; do not send the checklist to HMRC.

Starter Checklist

Once your new employer has your P45, Starter Checklist or has asked you for relevant information they will be able to check if you should pay tax. If you should, your employer will start to deduct tax from your wages. This system of taking tax directly from your pay is called Pay As You Earn (PAYE).

A new tax year begins every 6 April and finishes on 5 April the next year. In each tax year you can receive a certain amount of income before paying tax. This amount is called the Personal Allowance. In the 2014 to 2015 tax year the Personal Allowance is £10,000.

Normally under the PAYE system your Personal Allowance is divided by the total number of pay days you will have in the tax year. If you are paid:

  • monthly the allowance is divided by 12 (£10,000 divided by 12 months = £833 a month)
  • weekly the allowance is divided by 52 (£10,000 divided by 52 weeks = £192 a week)

If you are paid monthly your employer will not deduct tax from the first £833 you earn each month. If you are paid weekly your employer will not deduct tax from the first £192 you earn each week. If you give up work part way through the year, a refund may be due.

National Insurance contributions

You pay the same National Insurance contributions whether or not you are a student. Your employer will deduct National Insurance contributions from your pay if they are due.

The amount you will pay in the 2014 to 2015 tax year is:

• nothing on pay up to £153 a week
• 12% of the amount you earn between £153 and £805
• 2% of all your earnings over £805 a week

National Insurance contributions are due every time you are paid so you will not get a National Insurance refund if you stop working part way through the tax year.

Working as a self-employed person while you are a student

There are no special tax rules if you are a student and self-employed. You will be treated in the same way as other self-employed people.

You must tell HMRC if you start self employment by contacting the Self-employed: newly self-employed helpline.

You must do this within 3 months of starting self-employment or you may be charged a penalty.

HMRC will then send you a Self Assessment tax return at the end of the tax year.

More useful links

Reclaiming tax if you've overpaid through your job

Income Tax rates and allowances

National Insurance Contributions rates

Self-employed tax and National Insurance

Self Assessment