Do Students Pay Tax In The UK?

Ah, tax. We all pay it (hopefully), and we all hate it (we don’t need confirmation on this one) but does anyone understand it?

Until you start work, it’s unlikely that tax has ever been a serious worry. However, getting your first student job can leave you asking yourself: ‘Will I pay tax on my student earnings?’

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It’s a great question and one that deserves to be answered, even if that answer isn’t exactly what you want to hear. Welcome to being a grown-up!

What Is The UK Tax Threshold?

Wondering if you are liable to taxation is a common concern. Taxes have a way of being a point of great contention for everyone because they just suck, and they can be a bit scary. But while they are scary in general, for students who have not encountered paying taxes before, this can be a particularly worrying prospect.

Failure to pay taxes in the UK can lead to damaging reparations. Because of this, it’s important to understand whether you are liable to pay and how much.

To put it blankly: In the UK, all individuals are subject to income tax based on their earnings. We know it’s not what you wanted to hear, and honestly, we tried to warn you. This, of course, only applies if you’re above the minimum threshold.

Every tax year begins on the 6th of April and ends on the 5th of April the following year. At the start of the year, the government will announce the amount of income tax-free each person can make. This is your personal allowance.

For the financial year 23/24, the personal allowance is £12,570. This is the amount a person can earn before they need to start thinking about paying income tax.

Any UK citizen who earns above this threshold within the financial year will be liable to pay taxes. Unfortunately for students, they are treated the same as any other UK resident. It’s important that if you’re earning over the specified amount, you don’t ignore your taxes like you have been doing with a class here and there. Avoiding taxes is something that can have detrimental effects on your financial standing and can even result in legal action. The HMRC aren’t your friends.

What Determines The Amount Of Taxes Students Pay?

It is quite likely that many students simply won’t earn over the figure with a part-time job. It’s kind of a win-lose situation because it would be nice to have more than £12,570 a year, but if you do, you’re paying taxes. Nevertheless, it’s important to be aware of the threshold to know if it applies to you.

For example, self-employed workers may assume they are not liable to pay taxes. Whilst being self-employed is a great option, it comes with the responsibility of doing your taxes. If you’re not great with responsibility, maybe avoid this concept.

Being self-employed as a student can earn a healthy income whilst also demonstrating an entrepreneurial and driven mindset. But regardless of your success levels, you will need to fill out a personal tax form. If you’re unsure about any of this, seek professional advice from someone you know or a campus advisor.

For students employed on a part-time basis, the company that pays you will likely handle these payments themselves. This will automatically be deducted from your payslip as soon as you reach the threshold, but it’s worth checking with your employer that this is the case. This can be extremely beneficial because it takes some of the burden and responsibility off you giving you the ability to just focus on working, studying, and enjoying university.

Does My Student Loan Count Towards My Tax Threshold?

Whilst most self-employed and part-time earnings are subject to taxation, certain sources of income are tax-exempt for students.

Things like bursaries, scholarships, student loans and grants received for educational purposes will not be subject to tax and do not affect your threshold.

How Do Students Register To Pay Tax?

Another big concern you may have is not knowing how to pay taxes. This is totally fair because it’s not like we’re really taught these things. You’d think they’d teach us this in school, considering how important it is, but alas.

If you are employed by a company, it is their responsibility to deduct income tax through the Pay As Your Earn (PAYE) system. Employees then receive a payslip that details what has been deducted.

Whilst it is not the employee's job to deduct tax, it is important to double-check that the correct amount has been taken.

If a student is self-employed, things work differently. Self-employed students will need to register with HMRC and complete a Self-Assessment tax return. To do this, it is essential you keep a thorough record of all income and expenses related to the job.

If you are unsure of how to do this, find a local accountant who can help you get your finances in order for a small fee.

Do Students Pay Council Tax?

Income tax is not the only tax that students might face. Renting a house at your university may call council tax into question. However, households that are inhabited by full-time students do not have to pay Council Tax. Of course, sometimes you might get a bill. If so, you can apply for an exemption from your local council.

Conclusion

While tax may seem like a big, scary, and even confusing subject, it shouldn’t be. The bottom line is that everyone in the UK needs to pay tax on the amount they earn over the set threshold. As a student in any job, this will also apply to you.

Don’t be afraid to reach out to someone who knows more about taxes for more insight and guidance on the subject. So, speak to your parents, university financial advisors, employers, etc., to clear up any questions you might have about taxes. It’s best to know what to do so you do it right the first time.

This part is going to sound boring, but it’s worth checking out. Take a look at the regulations surrounding taxes and try to understand them so you can wise up when it comes to paying your taxes. Even if it doesn’t necessarily help you in the immediate future, it can help you post-student life when you may start paying more taxes and making bigger financial decisions.

Didn’t you know? Being financially literate is cool now!

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