Warning to every student with a summer job over 'confusing' HMRC tax rules

Students taking on temporary work in July and August have been warned not to fall foul of the multiple HMRC tax rules that can apply in different situations. This could affect anyone who takes on a summer job to earn money before their course starts or resumes in September.

Tax expert Andy Wood says the rules can be confusing for school leavers, sixth-formers and under-graduates who take on part-time jobs during the long summer break and aren't regular earners. He says it's important for students to know they do not need to pay tax until their wages exceed the thresholds for income tax and National Insurance, which are £1,048 per month and £242 per week, making up the personal allowance.

Employers typically handle income tax and National Insurance deductions through the PAYE system, which simplifies the process. However, self-employed students face additional responsibilities including the submission of self-assessment tax returns detailing income and expenses. This enables HMRC to calculate tax liabilities accurately and ensure compliance with regulations.

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Mr Wood says those who normally live and study in the UK but take on holiday jobs abroad will encounter their own unique tax considerations. While UK tax liability applies to earnings above the personal allowance, working for a foreign employer may mean different taxation arrangements. He said: "Awareness of these differences is essential to avoid potential tax problems."

Keeping hold of accurate records and understanding the tax procedures are essential for students changing from one part-time job to another, he cautioned. Make sure you collect a P45 form from your previous boss and hand it over to the new employer to ensure accurate HMRC deductions.

"Not doing so can result in over or underpayment of tax, leading to a range of financial consequences," Mr Wood said. If unsure, seeking guidance from HMRC can help you deal with job transitions smoothly and avoid any unwanted tax-related headaches arising.

Mr Wood also explained: "If a student stops working before the end of the tax year and their total earnings fall below the annual personal allowance threshold, they may have overpaid tax. Using HMRC's tax checker can help the process of getting back any overpaid taxes by providing accurate information about earnings and tax contributions.

"You may be eligible to claim tax refunds under certain circumstances, such as overpayment of tax or ending employment mid-tax year. To claim a refund, students typically need to complete forms such as P50 or P85 and submit them to HMRC.

"Students in the UK can save on taxes by leveraging various allowances and deductions, such as the personal allowance and tax relief on pension contributions. Additionally, exploring tax-efficient savings accounts or ISAs, maximising the use of tax-free allowances, and making use of investment strategies can further boost tax savings."

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