In 2016 it was announced that, as of the following year, university tuition fees would rise to £9,250. With generations of students beforehand having already struggled financially despite this hike in fees, it is not surprising that nearly 70% of UK students now have a part-time job whilst studying for their degree.
Whilst picking up shift work at university isn’t a new concept, many universities in the UK has had to impose rules on their students that limit the number of hours they can work in any given week so to not affect their education.
Some students who have little choice but to seek employment whilst studying are unknowingly overpaying their income tax. Current students and alumni from as far back as 2014 are eligible for a tax refund. The process is easier than you might think, and some graduates and students are surprised at the return they are receiving.
Why are students paying too much tax?
With many students hopping between part time roles and picking up employment back at home during the holidays, tax affairs can become complicated. Working more than one job or swapping employers regularly sometimes results in tax details not being up to date with HMRC. This means employers are likely using an incorrect tax code (visible on your payslips) which can result in many student overpaying on tax.
How to work out if you have paid too much tax
A great online tool to check if you are due a tax repayment is the HMRC tax checker portal. However, this is only applicable for those wanting to find out home much income tax they should have paid for the previous tax year.
Alternatively, you can arm yourself with a calculator and work out your tax liability and compare this to how much you have been paid.
How to work out your tax liability
You will need to find out the ‘personal allowance’ figure for the year you are investigating. For 2017/2018, this is currently £11,500. This is set to rise in the 2018/2019 tax year to £11,850.
Depending on the year you were studying, earning under the personal allowance threshold for the tax year should have meant you were not taxed. Anything over the threshold for the year you are investigating is subject to tax. If you have been charged income tax and were earning under this threshold skip straight to our ‘how to claim tax back’ section.
Payment Date | November 2020 | December 2020 | June 2021 | December 2021 | Total |
Percentage Return | 20% | 9% | 17% | 27% | 73% |
For whatever tax year you are exploring, you will need to gather as much information as possible. It is best to have the following paperwork at hand:
- P60 and/P45 from an employer
- P11D
- Bank building society statements
- Certificates of tax deducted
Start the process by working out your taxable income for the year. Remember, this runs from April to April. Your taxable income figure must be collated using the gross amount displayed on your payslips.
If this gross figure is over your tax free personal allowance limit, the remainder will be subject to tax at the basic rate of 20% (which rose from 17.5% in 2011).
See an example below for a student earning £15,000 in the 2016/2017 tax year:
Payment Date | November 2020 | December 2020 | June 2021 | December 2021 | Total |
Percentage Return | 2% | 24% | 16% | 25% | 67% |
This means, in the year 2016/2017, £800 should have been paid in tax.
Confused by tax liability?
If all the above is (understandably) intimidating you can always use HMRC’s Income Tax estimation tool if you want to find out how much you should be paying this year. The Low Incomes Tax Reform Group also have a detailed document on how to work out your tax, including a step-by-step guide and useful examples. Alternatively, you can always seek the help of a financial advisor.
How to claim your tax back
If your calculations indicate you have overpaid on tax you have the following options depending on your circumstances:
- Make at claim at any time when you’ve stopped work or left the job where you overpaid tax using HMRC’s online service or postal P50 form
- If you are currently working and paying too much tax get in touch with HMRC’s income tax department
Time limits for claiming back tax
Students and graduates alike have four years from the end of a tax year to investigate and claim a refund. After four years a tax year becomes ‘closed’ and you will not be able to claim.
Payment Date | November 2020 | December 2020 | June 2021 | December 2021 | Total |
Percentage Return | 27% | 9% | 18% | 28% | 83% |