Tax

Starting a new job? Unclear about tax? Problems getting paid? This section looks at what happens to your money when you get paid. Find out about National Insurance and Wages.

Income Tax

Income Tax is a percentage of your wages that must be given to the government to pay for services such as health, education etc.

You will pay tax on any earnings over £6,475 for the tax year 2010/11 (this is known as the Personal Allowance). If you do part time work as a student you will still have to pay tax if your annual earnings are above the Personal Allowance.
If you do holiday work while you are a student and are unlikely to earn more than the Personal Allowance you can fill in a P38(s) form so that tax is not taken from your wages.

When you start your first job you will be given a P46 form to fill in. Your employer should send this to the tax office to tell them that you have started work. If you leave a job you will be given form P45 to give to your next employer or hand in at the Job Centre if you are claiming benefit.

Paying Tax

Unless you are self-employed, tax will be taken from your wages by your employer and paid directly to the Inland Revenue. This tax is known as Pay As You Earn (PAYE). Self-employed people need to fill in their own tax forms and pay the Inland Revenue at the end of each tax year.

For most employees, PAYE makes sure that the right amount of tax is paid over the tax year as a whole. This is done by the use of a tax code number, which the tax office tells your employer to use. Your tax office will send you a form P1, telling you what your code number is. They will also tell you if your code changes.

Shortly after the end of each tax year (5th April), your employer must give you a statement known as a 'P60'. The P60 form says how much you have earned during the previous tax year, and is proof of the tax you've paid. You may well need to refer to your P60 at a later date.

Students and tax

If you're a student in the UK you have to pay National Insurance and may have to pay tax on your earning just like everyone else. However because your income might vary over the year you may be due a tax refund. You can find out if you're due a refund by using the calculator on the Student Tax Advice website.

If you're thinking of working during the holidays while you are a student and are unlikely to earn more than the Personal Allowance, you can fill in a P38(s) form so that tax is not deducted from your earning.

Last updated: 11-Dec-2009