Income Tax and National Insurance
Please note that the following information is designed as a rough guide to current rules regarding Income Tax and National Insurance. It is by no means a definitive document. Most students are now free to work prescribed hours provided that they are not Overseas Nationals who are prohibited from taking employment under the terms of their visa. If you are in any doubt about your freedom to take paid or unpaid employment or concerning any matters regarding taxation please ask for further advice.
*What is income tax
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Income tax is your contribution towards Government spending. As students you are not excluded from paying Income Tax on 'taxable income'. Everyone who earns or receives an income over a certain amount in any tax year (see below) will pay income tax. The more you earn the more you pay. When you start work you will need to give your employer details of your National Insurance (NI) number in order for your tax records to be properly updated. If you are a Non-UK National and have not worked in the UK before, you will need to apply for a NI number (see below). Your employer can arrange a temporary NI number for you whilst your application for a permanent number is pending.
*What income is classified as being taxable
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Grants, loans, scholarships, and most research awards are not taxable. Earnings from full or part-time work including tips and bonuses, as well as profits from a business or dividends from shares in a company are all classed as taxable income.
*If I start work how much of my income is taxable
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Everyone is allowed to earn a certain amount of money before tax is deducted. This is known as the Personal Tax Allowance (Currently £4,745 in this tax year). Earnings above the Personal Tax Allowance are taxed at a progressive rate. The more you earn the higher the percentage of tax you pay. Tax is usually deducted by your employer under the 'Pay As You Earn' (PAYE) scheme. This is where your employer will deduct tax on your behalf from your Gross Pay and pass it to the Inland Revenue for each day that you work. For tax rates please visit www.inlandrevenue.gov.uk/rates/it.htm
*Child Tax Credit and Working Tax Credit
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The Child Tax Credit and the Work Tax Credit are tax relief systems for people with children, for more information see www.taxcredits.inlandrevenue.gov.uk/HomeIR.aspx or you ring the help line on 0845 609 5000.
*Blind Persons Allowance
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In England and Wales, a taxpayer can claim a blind persons allowance for the whole tax year if s/he is a registered blind person or who became a registered blind person during the tax year. The allowance is additional to personnal allowance and currently is set at the rate of £1560.
*Part-Time, Temporary, and Holiday Employment
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You may calculate that you are not going to exceed your Personal Tax Allowance before the end of the tax year (5th April). This could happen if, for example, you start a part-time job half way through the tax year or just work in the holidays. You will need to ask your employer not to deduct tax under the PAYE scheme otherwise you may pay tax for which you are not liable and will have to claim it back at the end of the tax year.
If you have a P45 form (because you have already worked during the tax year) give it to your new employer. They will then be able to calculate your correct tax code and whether you will exceed your personal tax allowance before the 5th April and hence be liable for income tax.
If you have not taken any employment in this tax year, but start work and calculate that your earnings are not going to exceed your personal allowance (currently £4,745) before the 5th April then mention this to your employer when you start work. They should provide you with a form P38(S) that you must fill in and sign before handing it back to your employer to complete and send to your tax office.
If you have already paid tax on money earned this year, or in the last tax year (ending 5th April) and think that you may have paid too much tax then you should contact your Tax Office and ask them for a P50 form. Your employer should know which is your Tax Office, failing which you should contact your local Tax Inquiry Centre (see below).
If you need to contact an Inland Revenue Enquiry Centre There is a Web Site link to find your local office at www.inlandrevenue.gov.uk/enq/main.htm
For further information on Students and Taxation please read the leaflet Students and the Inland Revenue here
*Glossary
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- Tax Year
6th April - 5th April of the following year - Personal Tax Allowance
The amount you can earn in a Tax Year before paying tax (currently £4,745) - PAYE
'Pay As You Earn' scheme - the method whereby employers deduct tax from your wages directly - P38 (S)
The forms to use to prevent deducted under PAYE when taking a holiday job - P45
The form given to you by an employer when finishing work showing your taxable income to-date - P50
The form to use to claim back overpayments - P60
The form issued by your employer at the end of the tax year showing how much tax you have paid
*What is a National Insurance (NI)
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Most people who work must pay NI contributions. They are a method of gaining entitlement to certain benefits later on should you become ill or unemployed etc. If you start work for an employer whilst you study and earn above the weekly employee's earnings threshold (£91 per week in the this tax year) you will have to pay National Insurance.
*How do I get a National Insurance Number to give to my employers
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- If you are an UK National you are usually provided with a National Insurance number as a teenager.
- If you are not a UK National or do not have a current NI number you must make an appointment with the Department for Work & Pensions in order to have a number generated on your behalf. They will not usually do this for you until such time as you have found employment or have an offer of employment in writing. You will need to contact your local office of the (see contact details below).
You will only be able to apply for your NI number when you have a job offer as the application procedure requires that you provide
1) A letter from your prospective employer proving that you have an offer of work.
2) A letter from the LSE registry confirming the details of your course.
3) Your passport to show that you have a student visa status that allows you to work.
If you are unsure that you are free to work or how many hours per week you are permitted to work, or would like more information, please check with an Adviser at [Student Union Advice & Counselling Centre|/main/support/advicecentre] orUKCOSA - The Council for International Education
*Where do I apply for a National Insurance Number
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To apply for a National Insurance number you will need to contact your nearest Department of Work and Pensions (DWP) Office. The nearest to LSE covers WC1 and WC2 postcodes, or you can ask which is the office nearest to your home.
Tavis House,
1 -6 Tavistock Square,
London WC1H 9NB,
Tel: 020 7200 6000
You will need to write, phone or fax to ask for an application form (they do not see callers without an appointment). Once you have submitted the application from you should be offered an appointment . Contact the the local DWP on:
Tel: 020 7200 6073 or 020 7200 6339
Fax: 020 7200 6151 or 020 7200 6171
Or click here for further information.
