Am I paying too much tax? How much should I be paying?

Question

Hi,

I am a student, I worked 113 hours per month at a rate of £9.5 per hour, total £1073

the company put me on Tax code 000543L

- Is there any preferential tax rates for students?

- Am I on the correct tax code? or should I be on another one?

- If this is the correct tax code, how much money for tax and NI should be deducted?

- Any easy-to-understand website to calculate my taxes in the future?

A friend of mine is earning a bit less, but the percentage of his tax is wayy less, so I was wondering if I am paying more than I should.

Your help is appreciated.

Many thanks

Answer 1

1. No preferential rate for students. But if you earn under £5,435 (£6,035 from September) in teh tax year (April to April) you are below the threshold for paying tax and NI.

2. You are most likely on the correct tax code as it is the standard one. If you have another job, receive any benefits other than cash salary or have under/overpaid in a previous year the code may be different.

3. On gross monthly earnings of £1,073 you should pay £124 of tax and £68 of NI. This is on the basis that you earn the same amount for each month in the year. Otherwise you will be able to claim a tax (not NI) rebate at a later stage).

4. It's very easy to calculate yourself but I know a lot of people on here are keen on listentothetaxman.co.uk although i've never tried it myself.

Basically your first £5,435 (£6,035 from Sept) of income in tax free in the year and anything above that is taxed at 20% and pays NI at 11% if you are a basic rate taxpayer.

Answer 2

There are no preferential tax codes or concessions for students. It appears your tax code is correct, most people in the country are on that code number.

However the UK tax year goes from 6th April to 5th April, so if you started work after that, your employer may be using your code number on a week 1, or emergency basis, which means each pay day is taken in isolation. Does the code show W, M, or X after it? If that is the case, you may have an unused backlog of tax allowance. The easiest way to sort this is to download form P91 from www.hmrc/p91, complete it back to 6th April last (even if it means showing something like "full-time education"), and send it to tax office, so that a cumulative code number can be issued.

A good website to check your deductions is www.listentotaxman.

Your tax code will increase by 60 in September, due to the Government's backdown on the new tax reforms. the benefit will be retrospective back to 6th April.