National Insurance and Tax

If you are working in the UK, then you would normally be liable to pay National Insurance and Income Tax. This applies to home, EEA and international students. The amount you pay will depend on how much you earn. A National Insurance number or tax code does not give you permission to work. If you are an international student, then you must check that the stamp in your passport gives you permission to work.

If you are a student from outside EEA or if you are subject to immigration control, you should contact the University’s International Student Advisor for further information by emailing: immigrationadvice@aber.ac.uk or phoning: (+44) 01970 621548.


National Insurance

National Insurance is a government scheme where contributions paid by those in employment provide benefits for those who cannot work when sick, unemployed or retired. This includes covering yourself to qualify for certain benefits and the State Pension.

You pay mandatory National Insurance if you’re 16 or over and are either:

  • an employee earning above £183 a week.
  • self-employed and making a profit of £6,475 or more a year.

You may be able to pay voluntary contributions to avoid gaps in your NI contributions.

You need a National Insurance number before you can start paying National Insurance contributions.

If you’re employed you pay Class 1 National Insurance contributions. The rates for most people for the 2020 to 2021 tax year are:

Your pay

Class 1 National Insurance rate

£183 to £962 a week (£792 to £4,167 a month)

12%

Over £962 a week (£4,167 a month)

2%

 

The primary threshold in 2020/21 tax year is £183 per week. 12% of your earnings will be deducted in National Insurance contribution on all the money you earn that is above the primary threshold and below the upper earnings limit (between £183 - £962 per week). Over the upper earnings limit of £962 per week you pay 2%. You can find more information about national insurance on the HM Revenue and Customs website.


Your National Insurance (NI) Number

Your National Insurance Number is the unique reference number that the HM Revenue and Customs uses to store information about your income. They will keep information about how much National Insurance you have paid and how this affects any benefits you may be entitled to. If you are a UK student, you will have automatically been given a NI number when you reached the age of 16.

If you have lost or not received this number, you can usually find it on an old payslip or P60 if you have one available. If you still can’t find it you can either call the National Insurance numbers helpline on 0300 200 3500 or complete this form.

If you do not already have a National Insurance number, you only need to apply for one if you’re planning to:


Income Tax

Income tax is a tax levied by the government on income you receive during a tax year. Many students think that they are exempt from paying income tax, but this is not true. You can be taxed on income such as earnings, tips and any interest payments on savings that you receive. The tax year is different from academic years or calendar years and runs from April 6 to April 5 the next year. This means that any money you earn during the tax year will be counted as taxable income for that year.

The amount that you pay will depend on how much you earn and your tax status. You will not have to pay income tax on your UK student funding.

The amount that you earn before paying tax is called your personal tax allowance. If you earn more than this in the tax year, you will have to pay tax. If you are under 65 and earn less than £12,500 between April 6 2020 and April 5 2021 you will not normally have to pay income tax on it.


Income Tax rates and bands

Parliament decides each year how much we should be taxed, based on proposals put forward by the Chancellor of the Exchequer in his or her Budget. For the 2020/21 financial year you pay income tax at three rates:

The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,500. Income tax bands are different if you live in Scotland.

Band

Taxable income

Tax rate

Personal Allowance

Up to £12,500

0%

Basic rate

£12,501 to £50,000

20%

Higher rate

£50,001 to £150,000

40%

Additional rate

over £150,000

45%


Emergency Tax

Emergency Tax is payable if your employer does not have your tax code and assumes basic rate allowance, all at 20%. This is payable on all income, but you can receive a refund if you have paid too much.

You may be put on an emergency tax code if you’ve started:

  • A new job.
  • Working for an employer after being self-employed.
  • Getting company benefits or the State Pension.

If you’re on an emergency tax code, your payslip will show:

  • 1250 W1
  • 1250 M1
  • 1250 X

There is also a 20% basic rate which is payable on some income from savings. Further details of income tax rates and personal allowances are on the HM Revenue and Customs website.


How tax is deducted

Tax is usually taken from your wages by your employer and passed on to HM Revenue and Customs. This is called the PAYE (pay as you earn) scheme. If you are employed, it is your responsibility to pay tax, but it is the responsibility of the person who employs you to calculate your tax, deduct it from your wages and pay it over to HM Revenue and Customs. It is collected every week or month, depending on how you get paid.

Your tax-free allowance will be shared over the year and if you have more than one job at a time, it can be split between more than one employer. If you are paid weekly, your allowances are divided by 52 (£12,500 ÷ 52 = £240.38 per week) and if you are paid monthly, your allowances are divided by 12 (£12,500 ÷ 12 = £1,041.67 per month). This gives you your tax-free pay for each payday.

This means that if you are paid weekly and you earn £240.38 per week or less then you will not be taxed that week. Once you earn more than £240.38 per week your employer will start to deduct tax from your wages. To make sure your employer does not deduct too much tax from your earnings, you will need to complete a tax form. The main forms you will need to know about are set out below:

 

Starter Checklist

If you are starting your first job in a tax year, then you should fill in this form. Your employer must make sure that every new employee who earns more than £1 per week completes this form.

If you have a P45 from your previous job, then you do not need to complete the Starter Checklist unless you will be working in more than one job. If this is the case and you are going to be working for more than one employer, you can still fill in an additional Starter Checklist for your new employer.

 

P45

When you leave a job, you should be given a P45 by your old employer which you should give to your new employer. Your employer will send Part 1 of the P45 to HM Revenue and Customs and give you Parts 1A, 2 and 3. You need to keep Part 1A and give Parts 2 and 3 to your new employer.

This will tell them:

  • The gross pay that you have received in the current tax year.
  • How much Income Tax, if any has been deducted so far that year.
  • The Income Tax code; and your National Insurance number.

You should keep your P45 safe if you are not starting a new job straight away. If you start a new job, you should give your P45 to your new employer. Your employer will then send it off to their tax office, and it will help them to calculate your tax code and work out how much tax your will need to pay.

 

P50

You can use this form if you have stopped work, and don’t expect to work again during that tax year, and you think that you have been charged too much tax during the year. You should complete the form and either submit it online or send it by post to HM Revenue and Customs. If you would like help in completing this form, please come to see our Students’ Union Advisor to seek guidance.

 

P60

If you are in employment on the last day of the tax year (5th April) you will be given this form by your employer. It tells you how much you have earned and is proof of the tax you have paid in the previous year. It is very important that you keep this form safe, and in a place where you can find it easily. You need to keep it for at least 22 months after the end of the tax year.


Claiming a tax refund

If you think that too much tax has been deducted from your wages, but you are still in employment, you should not fill in a P50. Instead, you can claim online here. You can claim a refund from HM Revenue and Customs for any of the previous four tax years. You will need your employer’s PAYE reference number, which can be found on your P60, and you cannot claim on behalf of someone else.

There is more information on claiming a tax refund on the UK Government website.

There is also information on paying tax whilst you are a student on the UK Government website.


What can the AberSU Advice Service do to help?

The AberSU Advice Service is independent from the University and provides a free, confidential, and impartial service to all Aberystwyth University students. 

The Advice Service can assist you in a range of ways, including:

  • Explain your rights in relation to employment legislation and signpost where appropriate to external advice services.
  • Review any draft statements that you prepare and offer suggestions.
  • Accompany you where appropriate to any meetings to provide support and representation.
  • Help you to collate appropriate evidence to support your case.

To make an appointment to discuss all your options, including what support is available to you, please contact us below:


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First Produced: September 2020

Reviewed: October 2020

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