Any questions? What is the personal allowance?
We regularly receive queries via our website. We do not give advice, but we try to signpost sources of further information and support. Occasionally we will post them anonymously as ‘question and answer’ news items. Here, we were asked about the personal allowance for students.
Please note – this is posted as a ‘news’ item, which means the information and links are not reviewed and updated. You should not rely on it without checking the full facts of your case with a tax or welfare rights adviser.
Question: I have just finished my first year at university and will be working over the summer, what can I earn before paying tax?
Answer: Please note that the Tax Guide for Students website is written and run by the Low Incomes Tax Reform Group (LITRG) to provide tax information to students and their advisers. LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented taxpayer.
We do not offer an advice service, but below we give some general information on the personal allowance.
Most people who are tax resident in the UK can earn a certain amount of taxable income without paying income tax, this is called the personal allowance and is £11,850 for the current 2018/19 tax year, (a tax year runs from 6 April to the following 5 April).
This means you can earn £11,850 from your job over the tax year without paying income tax. Tax is collected by your employer and paid to HM Revenue & Customs through the Pay As You Earn (PAYE) system. The way this is done can mean that you overpay tax if you work for part of the year only.
For example, when you start your summer job, your personal allowance will be split over the year, so you can earn £987.50 per month tax-free (£11,850/12). If you earn above that monthly amount you will be taxed on the rest, even if over the whole of the tax year you will not earn above £11,850. This means you may pay too much tax. Usually HMRC reconciles the tax you have paid with the tax you should have paid after the end of the tax year but if you don’t want to wait that long you may be able to apply for a tax refund during the year. Our website explains how you can work out whether you are due a tax refund and how to apply for one.
Often students have more than one part-time job especially in the holiday period, if that is the case and you think you will earn less than the full personal allowance over the tax year then you should ask HMRC to split your personal allowance between your jobs so that no tax is deducted through the PAYE system. There is more information about what you can do if you work in more than one job on our factsheet.
Even if there is no income tax to pay because you are earning below the personal allowance you may still have to pay National Insurance Contributions (NIC). This is because NIC is calculated on a pay-day basis and not cumulatively over the tax year, this means that if you earn more than £162 per week or £702 per month then you will have to pay NIC. For more details on what NIC you pay as an employee see our website.
There is also a section on our website explaining tax issues for first time workers and a factsheet explaining what you should see on your payslip.