When studying in the UK, it’s more than likely you’ll have a part time job to help make ends meet, so it’s important to understand tax – also known as the big chunk out of your pay cheque.
There are two types of tax in the UK that will be deducted from your pay slip each month – Income Tax and National Insurance Contributions also known as NIC.
What are National Insurance Contributions?
Your national insurance contributions build up over time to ensure you have access to social security – e.g. your state pension and unemployment benefits. They’re calculated depending on what you earn and can’t be claimed back once you’ve paid them.
But what’s Income Tax?
Income tax is your compulsory contribution to the government to aid public services such as the NHS, police and other public services. This amount is calculated annually – rather than monthly. This tax kicks in if you earn over the £11,000 tax threshold – meaning you are taxed 20% on anything over this.
Student Loans Don’t Count
Remember, student loans and bank overdrafts do no count as earnings. You will simply be taxed on what you earn from working.
What Complications you might face?
It can be complicated if you’re working more than one job whilst studying as many employers deduct tax through PAYE (pay as you earn). Usually you will have the right amount deducted through PAYE, however you could be taxed more if you work full time during the holidays – due to your monthly earnings being higher than potentially your part time work during term time. So make sure you keep an eye on how much you are being taxed.
Think you’ve been overtaxed? Apply here to claim your tax back.