Quick Guide to Tax & Student £££Learn about the terms
There are lot of confusing terms, topics and rules out there and most importantly who is this tax-man taking my money? It was confusing to us at first as well don’t worry, but here’s a quick overview of some of the terms you’re going to be hearing from here on out.
1. What is your personal allowance?
Your personal allowance is an amount of income that you don’t have to pay tax on. Currently it is at £11,000 and of the new 2017 tax year it is said to go up to £11,500. You can however get a larger personal allowance from claiming certain tax allowances such as marriage allowance or blind person’s allowance. On a basic rule, the more you earn, the higher the income tax will be over the personal allowance.
2. What is National Insurance?
National Insurance (NI) is a system were workers and employers pay tax that is then used to help fund state benefits mainly. It started as a system for insurance against illness and unemployment. It now also provides for retirement pensions and other benefits. Other examples of state benefits include State Pension and Maternity Allowance.
You maybe now thinking, ‘This just sounds like another tax that the government is taking from me!!’ Well you’re not wrong, it is a tax that the government will take off each of your paychecks (if you earn more than £155 a week, for the 2016-17 tax year), however they are not allowed to directly fund government spending using national insurance.
3. Types of Tax
There are 2 main different types of tax that you should know about, taxable and non-taxable.
Taxable income is not just your salary, it can also be bonuses, tips and even state benefits.
Non-taxable income examples are such as your student finance, maintenance loan. When you are paid this loan, you are not taxed and receive the full amount.
This is important to know, as if you send a self-assessment to the tax man you could lose money if you include non-taxable incomes.
4. Are you owed tax?
Like those annoying PPI adverts, did you know as a working student you are most likely owed tax back? Most students don’t realise that they have been overtaxed or taxed at all. Make sure you read your paycheck and even keep them safe for later reference.
If you earn over £155 a week national insurance will tax you a small sum and if you earn higher than your personal allowance you will be taxed. However most students don’t earn past these thresholds. So if you don’t earn past these thresholds, keep an eye on if your paying tax that you shouldn’t, you could be surprised with the nice little sum you may be owed back.
5. How to claim tax back?
Firstly you should work out if you are owed tax back. If you are sure you are owed tax and are still working, you should contact HMRC and tell them what the issue is and they will help you out. Keep those paychecks ready for reference.
If you have left work, the process is slightly longer. You will need to get a P45 form, from your previous employer (they have to give you it by law). You will also need to download a P50 form which can be found on the HMRC website. When you send this form off you will have to send a copy of your P45 form as well.
OUR KEY TIPS
1. Keep track of your paychecks to make sure you are not being overtaxed.
2. If you have been over taxed, deal with it as soon as you can.
3. Don't hide from tax. As much as you might not like it, it is illegal to not pay tax.
Are there other terms that you haven’t heard of before? Comment below and let us know.