Student earnings tax and National Insurance

Short answer

Being a student does not give you any special exemption from Income Tax or National Insurance. There is a common myth that students do not pay tax, but that is not correct. Students are taxed in exactly the same way as everyone else. Whether you actually pay anything depends purely on how much you earn, not on your student status.

Income Tax

Everyone who is entitled to the standard UK Personal Allowance can earn up to £12,570 in a tax year (6 April to 5 April) before paying any Income Tax. If your total earnings for the year stay below that figure, you owe no Income Tax at all, whether the job is part-time, seasonal or a holiday job.

If your income for the year goes above £12,570, the excess is taxed at 20 per cent (basic rate) up to £50,270, then 40 per cent above that. Importantly, the allowance is an annual figure, not a per-job or per-employer figure. It covers all your taxable income added together.

National Insurance

National Insurance works separately from Income Tax and has its own thresholds, which are calculated on each pay period rather than annually. For employees (Class 1), you start paying National Insurance only once your earnings exceed the primary threshold, which is £242 per week (roughly £1,048 a month). Earnings between the primary threshold and £967 a week are charged at 8 per cent, with 2 per cent on anything above that.

Because National Insurance is assessed per pay period and is not smoothed out over the year, you can pay some National Insurance in a busy week (for example an intensive week of holiday work) even if your total earnings for the whole year are low. Unlike Income Tax, National Insurance overpaid simply because your income was uneven across the year is generally not refundable in the same way.

How the tax is collected: PAYE and tax codes

Most student jobs are employed roles, so tax and National Insurance are deducted automatically through Pay As You Earn (PAYE) before you receive your wages. You do not normally have to do anything to pay the tax yourself.

There used to be a special form (the old P38(S)) that let students working only in the holidays be paid without tax deducted. That scheme was abolished some years ago and no longer exists. Students are now treated the same as any other employee under PAYE.

Why students often overpay and get a refund

Overpayment is common for students, especially with holiday or short-term work, for two main reasons.

First, PAYE assumes your current pay will continue at the same level for the rest of the year. If you earn a lot in one intensive burst (for example a summer job) but little for the rest of the year, the payroll system may deduct tax as though you will keep earning at that rate, so you end up paying tax even though your annual income will stay under £12,570.

Second, if you start a job without your employer having a correct tax code (for example no P45), you may be put on an emergency code and taxed more heavily at first.

In these situations you are usually entitled to a refund of the Income Tax overpaid, because your annual income was below the Personal Allowance.

How to reclaim overpaid Income Tax

1. Keep your payslips and your P45 (given when you leave a job) or P60 (given at the end of the tax year by an employer you are still with). These show your earnings and the tax deducted.

2. If you are still working for the same employer, an overpayment often corrects itself automatically through PAYE as the year goes on, because the code spreads your allowance across the remaining pay periods. It can therefore be worth waiting until the position settles or until the end of the tax year.

3. If you have stopped working and will not work again before the tax year ends, or the year has ended and you were still overtaxed, you can claim a refund from HMRC. After the tax year ends, HMRC often reconciles your record automatically and sends a P800 calculation, but you can also check and claim through your Personal Tax Account on GOV.UK. You do not need to pay anyone to do this for you.

Points that could change the position

Several facts affect the answer, so check the following.

Whether you are employed or self-employed matters. If you do freelance or gig work, you are responsible for reporting income yourself through Self Assessment and may pay Class 2 or Class 4 National Insurance instead, with different rules and thresholds.

Whether you have more than one job at the same time matters, because your single Personal Allowance is usually applied to one job, and the second may be taxed in full through its own tax code even if your total is under the allowance. You can ask HMRC to split your allowance between jobs.

Whether you are entitled to the full UK Personal Allowance matters. Most UK-resident students are, but international students and those with unusual residence positions should check their specific status.

Whether any of your income is not employment earnings matters. Student loans, most scholarships and bursaries, and maintenance grants are not taxable and do not count towards these limits.

If your circumstances are more complicated than a straightforward single part-time job, tell me the details (number of jobs, employed or self-employed, rough earnings, and whether UK-resident) and I can be more precise.