Working during the summer – can you claim a repayment of tax?
The long summer break is a great opportunity for students to earn a bit of extra cash. However, you may have noticed tax deducted – probably the last thing you wanted to happen! Well the good news is that you probably can claim that tax back. We will walk you through the process.
As a student working in the summer holidays, you may find that more tax is taken from your pay packet than you actually need to pay. This is basically because your PAYE (Pay As You Earn) deduction is usually based on your weekly/monthly pay but your overall tax liability is calculated annually. So if you get a summer job for ten weeks that pays you £250 a week, the PAYE system will expect that you will be getting this wage every week of the year and think that you are going to earn £13,000 annually and will deduct tax accordingly. In fact, you will only earn £2,500 during the tax year – which is less than the current £10,600 personal tax threshold – so any tax that you have paid should be due back to you.
If you have now returned to full time study and definitely will not be working again before 5 April 2016 (including any part time or casual employment), you can make an in-year tax refund claim on form P50 (this form is available on-line only). You can use HMRC’s tax checker tool to work out how much your refund might be. If you use the form P50, be aware that if you make a declaration that you do not expect to work again, but then do, you may pay ‘emergency tax’ for the remainder of the tax year – meaning that you may overpay again. If this is the case then HMRC’s reconciliation system should aggregate all your pay and tax details at the end of the tax year and any further refund should be automatically repaid by cheque provided HMRC have an up-to-date address on file. It is worth checking the address that HMRC holds for you in readiness.
National Insurance contributions (NIC) are not calculated cumulatively like income tax but on a pay period basis, for example if you get paid weekly then your NIC will be calculated on a weekly basis. This means that if you earn more than £155 per week you will pay NIC even though over the whole tax year you may earn less than the annual threshold (£155 x 52 weeks). There is more information on understanding how NIC is calculated on our website.
Our section on tax refunds covers how to work out whether you have paid too much tax and how to claim a tax refund if you have overpaid tax not just while working but also from savings and through the self-assessment process. Finally, there are time limits on claiming a tax refund, so if you have overpaid tax this summer you have until 5 April 2020 to make a claim. However, if you have overpaid tax and know you will not be working until next summer then don’t delay in asking for your refund.