Students: Should You Pay Tax on Your Summer Job?

If you have taken on a summer job and received a payslip with tax deducted, then there is a chance you may be one of the many who are overpaying on the tax.  Here are the rules:

Tax Free Allowance

Each tax year, which runs from 6 April to 5 April, you are entitled to earn a certain amount tax free.  For the current tax year, 6 April 2017 to 5 April 2018, this is £11,500 for that 12 month period, called Personal Allowance.

If you do not normally work while you are studying at university so your summer job is your only job for the year, then it is likely that you won’t earn more than £11,500 during the summer holidays.

The payroll system means you receive your Personal Allowance over the 12 month period, not all at once.  So you are entitled to your Personal Allowance at a rate of £958 per month or £221 per week.

An Example:

Molly has a summer job for 4 weeks and earns £350 per week for this.  Molly’s total earnings are £1,400 well below her annual personal allowance of £11,500.  Molly has no other jobs for the tax year.

Due to how the payroll system there will be an assumption that Molly is earning £350 per week for the whole year, putting her above her tax free allowance at £18,200 (£350 x 12).  So tax will be deducted from her earnings in her summer job.

What Can Molly Do?

Molly should firstly check that she is entitled to a tax refund.  She can do this on the HMRC website here.

Then once she has confirmed that she needs to claim for a tax refund, she needs to complete a for P50.  This can be done online and involves creating an online account with HMRC or by post by completing then printing off the form here.

What about National Insurance?

National insurance is worked out separately to Income Tax and is payable at a rate of 12% on earnings over £157 per week as a flat rate so in our example Molly would need to pay this despite earning below the taxable threshold.

Remember everyones circumstances are different, so seek advice if you are unsure of the factors surrounding your personal situation.

Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of - a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.