Student Tax Refunds – are you owed money?
Probably! Many students who have undertaken some kind of paid work whilst studying are unaware that they are eligible for a student tax refund.
This guide will take a quick look at how much you could be eligible to claim back and how to go about doing so. For example, did you know that you can claim back overpaid tax from as early as 2007 in the year 2013!
Do Students Pay Tax?
Yes, students do pay tax. And here’s an alarming statistic for you: £75 million of overpaid tax by students is being held by the British government!
You could be one of the hundreds of students in the UK that has around £650 left unclaimed. Just imagine what you could buy with that!
Why students commonly overpay tax
This is why it happens.. students that go on a placement year or work part-time during university often do so over two tax years.
Since most students do not end up earning over the tax-free personal allowance within a single tax year (April – April), and coupled with the fact that employer’s often put them on the wrong or ‘emergency’ tax code, students tend to pay more tax than they should be without even knowing it.
The average amount of tax students overpay
If you were lucky enough to be on paid placement, then as a student your tax overpayments amount to, on average, £650. Even if you were on a minimal salary, there is a good chance you paid too much tax.
You can also claim back tax if you have had a part-time job whilst at university, and it is more likely than not that you would have been paying too much income tax.
What is the personal tax-free allowance?
By law anyone can earn anything up to £8,105 (2013 figure) in a tax year and you do not have to pay tax on it.
It is estimated that 90% of students who were in some form of employment whilst at university do not realise that they are able to claim some tax back in the form of a student tax refund. So you could be in for a nice surprise… Find out how much you could claim back using our tax refund calculator.
Extra Tip: This also applies if you work abroad so check with the tax office before you plan to travel and work to avoid paying unneeded income tax.
How to avoid paying tax
Your employer (unless you are self-employed) controls your tax payments to the government (HMRC) and they have to pay them by law. The tax is deducted from your pay slip as PAYE (pay-as-you-earn).
National Insurance is also paid if you earn above £139 a week. Unfortunately you cannot claim back overpaid National Insurance contributions.
If you are planning to just work during the holiday periods and you know that you will not be earning above the personal tax allowance (see above) in the tax year then you can fill out a P38S form. This will mean that your employer will not deduct tax or PAYE from your earnings.
It is important to bear in mind that to fill out a P38S form you will have to attend a university included on the form, be studying up until May of the next year and earn under the tax-free threshold.
If you have any savings and earn under the allowance then you need to also tell your bank to pay you interest gross (pre-tax) rather than net (after tax). By default banks will deduct 20% tax from your interest earnings automatically!
How to get a student tax refund
Tax doesn’t have to be taxing!
Easy for them to say! But in fact, whilst it can be confusing it isn’t really that difficult for most students to apply for a tax rebate. If you want to find out how much of a tax refund you might be due call our freephone advice line 0800 8620258.
If you have left work
To start with your application for a student tax refund you need to get a P45 from your previous employer (they have to supply you with one by law).
Then you will need to work out whether you have paid too much tax (use our tax calculator here). When you are sure that you have overpaid then you need to download a P50 form. Along with this you will need to send Part 2 and Part 3 of your P45 to HMRC and keep Part 1 as a personal copy.
If you find it too confusing, have lost or don’t have any of the forms, or simply don’t have the time or patience, then we can do everything for you via our new student tax back service.
If you are still working
Simply contact HMRC and tell them of your situation. They will advise you from there in order to make sure that you are not paying too much tax.
Does the government owe you money? Click here to find out.Last updated 1st March, 2013