Student tax issues: what if you work while studying?

Get clued up on student tax rules

Even with student loans, student grants if you can get them and help from parents and family, many students find themselves short of money at university. Taking a part-time job or working in the holidays is a brilliant way to make yourself more financially independent and get some valuable work experience at the same time.

But before you start applying for jobs, it’s important to get clued up about student tax rules so that you don’t start your working life by upsetting Her Majesty’s Revenue and Customs (the all-important HMRC).

Student tax breaks for working only in the holidays

If you are a student at a UK institution and you only work during the long holidays (Christmas, Easter and summer), it’s possible that you won’t have to pay tax, but you do have to make sure you give your employer all the information they need so that HMRC can issue you with a student tax code.

What do you need to do?

In previous years you may have filled out a P38(S) to get a student tax code, but this no longer applies and you’ll now be treated just like any other employee.

  • Complete a form P46 or provide your employer with all the information to work out your tax code.
  • Once Her Majesty’s Revenue and Customs (HMRC) have received your P46, they will issue your employer with the appropriate tax code (taking into account any deductions and allowances you may be entitled to).

National Insurance and student tax if you have a holiday job

National Insurance Contributions (NICs) are only deducted if you earn over a certain threshold. Check HMRC to find out if you have to pay.

Student tax allowances: what if you work during term time?

If you work during term time the holiday only student tax rules no longer apply, you will be subject to the same rules as every other employee.

Income tax and term time work

  • Give your employer your P45 of you have one, or complete a P46
  • HMRC will provide your employer with a tax code.
  • N.B. You need to get a tax code for every job you have.

National Insurance and term time work

The rules for National Insurance Contributions (NICs) if you work throughout the year are the same as for if you only work during the holidays.

Student tax rules if you are self-employed

There are no special student tax rules if you are self-employed, but you must:

  • Contact HMRC within 3 months of establishing your business or you will face a large fine.
  • HMRC will then send you a self-assessment tax return, which you need to fill in accurately.

Make sure you complete your student tax allowance paperwork

Student Tax RulesHMRC don’t treat ignorance as an excuse for you not registering for paying your tax and National Insurance so make sure you ask about and complete all the relevant notifications as soon as you start every job so that all your student tax records are fully up to date. Remember to also keep copies for your own records.