For many students, working part-time or during the summer months is a common way to earn extra income and gain valuable experience. However, what some students may not realize is that they could be overpaying income tax without even knowing it.
The reason behind this is relatively simple: most students do not earn enough to reach the personal tax-free income allowance threshold each year. As a result, they are entitled to receive a refund on the tax they have paid, as they should not have been taxed in the first place.
One common issue contributing to this problem is the assignment of an emergency basic tax-code by employers. This tax-code is often used when an employer does not have enough information about an employee’s tax status, such as when a student starts a new job. As a result, tax is deducted from their earnings at a basic rate, even though they may not actually owe any tax.
To ensure that you are not overpaying income tax as a student, it’s important to take proactive steps to address this issue. Firstly, make sure to provide your employer with accurate information regarding your tax status, including any other sources of income you may have. This will help ensure that the correct tax-code is applied to your earnings.
Additionally, you can reclaim any overpaid tax by contacting HM Revenue and Customs (HMRC) directly or through the use of online tax refund services. By submitting a tax refund claim, you can receive a refund on the excess tax you have paid, putting more money back in your pocket.
Ultimately, understanding the intricacies of income tax as a student can help you make the most of your earnings and avoid unnecessary overpayments. By staying informed and taking proactive steps to address any issues, you can ensure that you are not paying more tax than you need to, allowing you to maximize your income during your time as a student.