Taxes are one of many factors that you need to think about as a student and young adult in general. Everyone pays taxes to the government at some point in their lives. But how do you know if you are exempt? One of the biggest questions students ask when settling into new homes is ‘do students pay tax?’. We’ve summed up some of the key aspects of taxes that every student should be aware of.
What actually is tax?
Most people have heard of tax, but few are able to break down what this means. For a simple answer, taxes are compulsory sums of money that each individual must pay in order to help their nation pay for public and other services unless they are exempt.
There are many distinct types of tax that British taxpayers are expected to pay. Council tax is a bill that you receive yearly. The bill will tell you exactly who has to pay and how much to pay. Other forms of tax include income tax and national insurance. Many individuals are exempt from paying tax, but it can be extremely difficult to know if this applies to you. Continue reading to find out!
Do students pay taxes? Employment taxes as a student
If you are in some form of employment (full-time, part-time or self-employed) as a student, there are several taxes that you should be aware of. If you are being paid an average of over £1,042 per month, you will need to pay Income Tax.
Additionally, for those earning over £190.00 per week, you will be required to pay National Insurance Tax. Luckily, most employers are part of the Pay As You Earn (PAYE) scheme, which deducts your tax money from your wages. So you don’t really have to worry about doing it yourself unless you’re a freelancer or self-employed. If you are eligible for tax, it is important to check with your employer whether you are a part of this scheme.
National insurance contributions
National Insurance contributions are payments made by both employees and employers in the UK, to fund various types of state benefits, including the state pension, unemployment benefits, and healthcare services.
For students who are working part-time or completing an internship, it’s important to know that you may be required to make National Insurance contributions depending on your level of income. The amount you need to pay is typically a percentage of your earnings above a certain threshold.
However, if you earn below this threshold, you may not need to make any contributions. Being aware of your National Insurance obligations is crucial not only for compliance with the law but also because your contributions can impact your entitlement to future benefits.
Students and taxes – Council Tax
Do students pay council tax? In the UK, households that are completely made up of full-time students are exempt from paying council tax. Full-time students are classed by the UK government as attending a course that lasts at least one year and involves over 21 hours of study time per week.
You may also be entitled to a council tax exemption if you are on a certain apprentice scheme, a student nurse, a ‘live-in carer’, a diplomat or if any other exemption listed on the GovUK website applies to you. Take a closer look at the full list of those who are ‘disregarded’ from paying council tax.
If any of the circumstances above apply to you and you have still been asked to pay council tax, apply for a council tax discount on this link. If you are eligible for a council tax exemption, bear in mind you may still have to pay other forms of tax. If you are a household that is partially made up of full-time students, then you can apply and qualify for a discount on your council tax bill.
Unfortunately, if you’re a part-time student, you will have to pay council tax.
How much council tax will I have to pay?
For those who do not qualify for a council tax exemption, then you need to calculate how much to pay. In order to work out your tax amount, you need to know the valuation band of your home and how much this band is charged by your local council. These can both be found on your local government website. If you receive a letter, it will normally have all the information on there already.
How do students pay tax?
You should receive your council tax bill in the post. If you do not qualify for an exemption, then you can pay your council tax bill online. You can do this via your local government website. This is the case for all of England, Wales and Scotland.
The tax bill is normally spread across a ten-month payment plan. Alternatively, this can be altered to twelve months for those struggling to keep up with payments.
Who pays Council Tax on a rented property?
The Tenants are responsible for paying council tax on rented property.
On rented property, your council tax is usually paid monthly in England, Scotland, and Wales. However, in Northern Ireland this would be paid via a ‘rates bill’. You can find out more about your ‘rates bill’ here.
Tenants who are renting are also responsible for paying water bills, service charges and gas and electricity bills as well as council tax.
How to organise council tax in a flat-share
Bills and taxes are a trickier side to adulting, but they can be made easier through different apps and reminders. Bill splitting apps allow you to efficiently pay monthly bills equally amongst flatmates and without any hassle. For those living in a household not made up completely of full-time students, then council tax can be included in this calculation.
If you have any queries about students and taxes or paying other types of bills, there are plenty of online resources to help you. You can check your local government website for advice or ask your student support officers at your university.
Do I pay Council Tax if I’m moving back in with my parents?
There is a person in charge of paying the council tax bill for each home property. This person is called the ‘Liable person’. If you are the liable person, you are responsible for paying the household council tax.
You are only liable to pay or contribute toward paying the household council tax if you have received a notice for the payment to your name. If you have not received this notice, then you can leave paying the household council tax to the ‘liable person’.
Firstly, you also need to determine who the ‘liable person’ in your household is before you pay your council tax. You should compare each household member to ‘The hierarchy of liability’ and select the individual who is nearest the top.
This hierarchy is as follows:
- The resident who either owns or leases the full or part of the property
- The resident (or residents) who is (are) a tenant
- The resident who owns the licence to the building and lives there
- Any resident living there
- The property owner if no residents live there
Common questions about having to pay income tax as a student
If you find that you've overpaid when paying income tax, it's crucial to rectify the situation as soon as possible to claim a refund. Overpayment can occur for various reasons, such as withholding too much from your payslip, making errors on your tax return, or not taking advantage of eligible deductions and credits.
Tax free personal allowance refers to a specific amount of income that an individual is allowed to earn without being subject to income tax. The purpose of the allowance is to ensure that low-income individuals are not burdened by taxation, and to simplify the tax system by eliminating the need for people with very low incomes to file returns.
As a university student, you might be wondering about your obligations regarding National Insurance contributions. If you're working part-time, on a paid internship, or have any other source of earned income, it's important to know that you may be required to make National Insurance contributions.
Generally, you'll start paying these contributions once your earnings exceed a certain threshold, which can vary each tax year. These contributions go towards funding state benefits, including pensions and healthcare services.
Even if your main focus is your studies, understanding your National Insurance obligations is crucial for staying in compliance with the law and ensuring you're eligible for future benefits. Need to know more about tax if you're a student and self-employed? Click here to view our article on How to do a tax return as a student.
Common myths about students and taxes
“Students don’t pay taxes.”
One of the most common myths surrounding taxes is the notion that students don’t have to pay income tax. Unfortunately not. The reality is that student status does not automatically grant exemption from having to pay income tax.
In fact, students who earn an income – whether from jobs, internships, freelance gigs, or even certain types of scholarships and grants – are generally required to file a tax return and may owe taxes. As a student, it’s often easier to take a full or part-time job so that any taxable income is automatically calculated.
If you’ve overpaid tax, don’t fret, you’ll likely be entitled to a tax refund later on.
Understanding your paying tax as a student is crucial for both legal compliance and your personal financial well-being. Contrary to the common misconception, being a student doesn’t automatically exempt you from paying taxes or making National Insurance contributions.
Taxes are generally applicable if you have earned income from part-time jobs, internships, or even some types grants.
Last Updated on March 16, 2024
Published on September 6, 2023
