National Insurance And Tax
Kris Rao is an official provider of services to meet student welfare needs at Reading University. He has produced a range of informational leaflets and booklets for the international students who study there.
NATIONAL INSURANCE AND TAX
National Insurance numbers
Everyone who works in the UK requires a National Insurance (NI) number. You do not need one before you start working so should ask your employer to issue you with a temporary NI number following the CA28 guide.
National Insurance numbers are issued by the Department of Work and Pensions (DWP). Getting an NI number can sometimes be frustrating. Call the National Insurance helpline on 0845 302 1479 and give them your UK residential address and employment details to find out where your local DWP Office or Job Centre Plus Office is. You can also locate one online at www.dwp.gov.uk or www.jobcentreplus.gov.uk or in the telephone directory (under government buildings).
You will need to apply for an NI number at the Social Security Office or Job Centre Plus Office. You will need to contact them first by telephone to make an appointment. You’ll then be sent a letter confirming the appointment date and time along with the details of the documents required.
You will need to take your passport, proof of address (a letter or bill sent to your address in the UK), a letter from your employer confirming your employment and proof of your student status. The interview usually takes around an hour. You will then get a letter from a member of staff at the Social Security Office or Job Centre Plus confirming that you have applied for an NI number. You will then be sent your NI number by the Department and Work and Pensions. The number will be issued on a plastic card and will be made up of numbers and letters e.g. SX 12 34 56 C. It can take up to eight weeks for an NI number to be issued.
Tax and National Insurance payments
Generally speaking, the company you are working for will deal with all your tax and National Insurance payments through the PAYE (pay as you earn) system. As a student you are liable to pay tax and National Insurance once you have passed the relevant thresholds, although most international students do not earn enough in a financial year to pay tax. You have to pay tax on any income over £91.25 per week or £4,745 in a tax year. The tax year in the UK begins on 6 April and runs up to 5 April of the following year. You’ll have to pay National Insurance once your income is over £67 per week. Rates vary for those with dependants or a disability.
Annual income tax rates
- Personal tax-free allowance: £4,895.
- The lower rate (10%) is payable on the first £2,020 of income over the personal allowance.
- The basic rate (22%) is payable on income between £2,020 and £31,400 over the personal allowance.
- The higher rate (40%) is payable on income more than £31,400 over the personal allowance.
- All emergency tax is taxed at a basic rate allowance of 22%.
Tax and National Insurance payment calculations are very complicated and are based on your PAYE tax code. If you think you might be paying tax or NI unnecessarily, seek advice from the Citizens Advice Bureau, your college or university’s advice centre or your local tax office.
If you are working for an employer during vacation time only, you can fill in a form P38 (S), which confirms your student status and stops tax deduction.
If you are working for two or more different employers, you will probably find that you are paying tax on both jobs. If your total income is still less than the tax thresholds, you can either reclaim this tax at the end of the tax year or arrange with the Inland Revenue to split your personal allowances between the jobs. Seek advice from the Citizens Advice Bureau, your college or university’s Student Advice Centre or your local tax office.
EMPLOYMENT RIGHTS
If you work while studying it will probably be on either a part-time or casual basis. The difference between the two is that for the casual worker there is no mutuality of obligation. That is, you are free to work when you want to and the employer is free to offer work when she or he wants.
You are entitled to a written statement of particulars, which should detail:
- the names of the employer and employee;
- the date when the employment began and the period of continuous employment;
- the scale and rate of remuneration, how often the employee will be paid and the method of calculation;
- terms and conditions relating to hours of work and holiday entitlement (including public holidays);
- the job title or description; and
- the employee’s place of work.
Casual workers, however, do not have a right to holiday pay, sick pay or other benefits. Part-time workers do have these rights, so wherever possible it may be better to obtain part-time status when applying for work.
Part-time workers also have the right to: access the company sick pay scheme; payment of severance pay; service supplements acquired after longer service. They also have the right to overtime rates of pay but only after they have completed the ‘full-time’ hours.
A part-time worker will have to give notice to leave, and this will either be agreed in your contract or will be the equivalent of one pay period (that is, if you are paid weekly you will give one week’s notice). Although casual workers technically have to give notice, they do have the right to refuse any work offered.
You are always entitled to receive payment for work done. If, for any reason, deductions are made from your wages or pay is withheld, seek advice from the International Office, Citizens Advice Bureau or your student advice centre.
Forms
P38 (S)
P38 (S) is a form for full-time students working during vacations only. The student needs to fill in their course details, along with his or her address and NI number and hand it over to the employer. The form confirms the student status and prevents tax from being deducted.
P45
P45 is a record of your earnings, tax deduction and NI contributions from your previous job. Your P45 will confirm the total amount of pay you have received in the current tax year, the total tax paid, your income tax code and your total National Insurance contributions.
When you leave a job you are given a P45 by your employer. Keep this safe and give this form to your new employer when you start a new job. Your new employer will then send part of it off to their tax office and will help them in calculating your tax contributions.
P46
P46 is a form which your employers will ask you to fill in if you do not have a P45. The tax office will allocate you a tax code and your employer will then deduct tax according to the tax code.
P60
P60 is a detailed record of your earnings, tax deductions and NI contributions for the previous tax year. At the end of every tax year, your employer will give you a P60. Keep this safe as it is the only recordable document of your taxable income and NI contributions. It is difficult to obtain another copy.
Working illegally
The consequences of working in violation of your ‘leave given’, illegally or without a work permit (when one is required) can be severe. You risk receiving a fine, deportation or even imprisonment and this might affect your studies in the UK.
GLOSSARY OF TAX AND Nl TERMS
National Insurance: A tax charged on income in the UK that is used to finance state benefits (health, pensions, etc.). Your National Insurance contribution is payable on top of income tax.
PAYE: Pay As You Earn. PAYE is a system which almost all employees use in the UK to pay their income tax. The employer deducts tax directly from wages or salary before they are received. An employer is responsible for sending tax to the tax office.
Personal Tax Allowance: This is the most that an individual can earn before paying income tax. For the current financial year this is £4,895.
Tax code: This is provided by the tax office and shows the allowances one can receive under the PAYE system. The tax code has three digits followed by a letter e.g. 494T.
USEFUL TELEPHONE NUMBERS
USEFUL WEBSITES
The website of the Home Office has complete information and guidance on immigration regulations and employment restrictions. The site also has details about the Workers’ Registration Scheme for nationals of eight Accession States of the EU.
This government-run website has complete information and guidance about working in the UK.
Unison is the largest trade union in Britain and represents people who work in public services, voluntary and private sectors. The website has many publications, articles and documents on employees’ rights while at work.
The website of the Trade Union Congress (TUC). The TUC represents workers from 70 affiliated unions and campaigns for a fair deal at work. The website has useful downloadable leaflets on your rights at work.
The website of the Citizens Advice Bureau. This has much useful information about rights at work, pay and other statutory rights. The website also has local addresses and telephone numbers where free and confidential information and advice can be obtained on employment matters.
The website of Customs and Excise where all the information on tax and NI contributions can be found. This website has a special section for students and their tax matters.
The Commission for Racial Equality is a government body that works to prevent racial discrimination, harassment and abuse. The website has downloadable publications on equal rights for all at work. It also operates a confidential advice service.
The Equal Opportunities Commission is an organisation working to stop sex discrimination at work in the UK. The website describes in detail rights for men and women at work.
The Disability Rights Commission website advises on the rights of disabled people and the legislation for disabled people and their rights that exist in the UK.
