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At a time of increasing university costs and student loans trouble, many students will be pleased to know that they could be eligible for financial reimbursement; from the taxman.

Her Majesty’s Revenue and Customs (HMRC) are currently undertaking a campaign to raise student awareness of tax, and this could have enriching implications for those students who work, or have worked, throughout the year.

Contrary to the popular myth, students do have to pay income tax. However, regardless of how many jobs that one undertakes, or the length of employment, if you earn less than £6,475 this financial year then it is possible to claim back the tax that you have paid.

Income tax is the tax that is deducted from your earnings and it applies to everyone but according to HMRC research over half of the UK’s 2.3 million students do not realise this. Many students seek paid employment to supplement the student loan through term-time, or take work during the holiday periods, and some do both. The HMRC are currently trying to raise awareness on the issue of tax and Jane Frost, Director of HMRC Individuals Customer Directorate, said that “We want to help students understand how the tax system works so they don’t pay more than they should and get back what is due.”

The financial year runs from April 6 to April 5of the following year. When someone leaves a job they are given a P45 form, which details how much they have earned in their period of employment during that financial year. This document also states how much tax the employee has paid. If someone has earned less than the Personal Allowance of £6,475 and paid tax then it can all be claimed back.

A P60 form is given to an employee at the end of the financial year if, at that time, they are still working. The P60 summarises the yearly earnings and tax paid for a particular job. Students with more than one job at the 5 April each year will receive a P60 from each employer. If someone starts a new job whilst continuing another then they will be asked to fill in a P46 by their new employer. This form gives the employer the information needed to notify the HMRC that a new employee has started, so that the HMRC know which tax code to put that person on. Having two jobs does not entitle an employee to two separate personal allowances, but if the total income of both jobs does not exceed £6,475 in the financial year then any tax paid can be reclaimed.

The tax code is the method by which an employer works out how much tax to deduct from an employee’s earnings. For students who only plan to work during holiday periods and believe that they will earn less than the Personal Allowance in that financial year, it is possible to avoid paying income tax by completing a P38(S). Available from the employer the P38(S) states that the new employee is a student who will return to full-time education and does not expect to earn more than the Personal Allowance. On submitting the P38(S) a student should not be charged income tax during their period of employment.

As well as income tax employees also have to pay National Insurance contributions (NICs). NICs, like income tax, are automatically deducted from earnings and the money goes towards social security benefits and the National Health Service. Once an employee’s income exceeds £110 a week they subject to NICs but, regardless of how much is earned in that financial year-even if it less than the Personal Allowance, this money cannot be claimed back. 

If you believe that you have wrongly been charged income tax then you can work it out using the student tax calculator at http://www.hmrc.gov.uk/calcs/stc.htm. The same application is available on Facebook at:

To claim a tax refund it is necessary to fill in a P50 form and send it to your tax office with parts 2 and 3 of your P45. Refunds will be sent in the post so remember to let the HMRC know when you change address, as failure to do so could mean that you miss out on important letters.

All information on this subject is available on the official government website where it is also possible to download a P50, and search for your nearest tax office: www.direct.gov.uk/studenttaxadvice.

The Personal Allowance changes each year and in 2008-2009 it was £5,435, so check your P45 and/or P60 because you can still claim any wrongly charged tax back from previous years.

Tax can be a confusing subject but this should not deter students from attempting to understand it as doing so could save hard-earned money.