Students encouraged to check their tax bill

Students could be paying the incorrect amount of tax following the introduction of the new PAYE system and the abolition of the form which allowed students to defer paying income tax when getting paid for holiday work, the Low Incomes Tax Reform Group (LITRG) have said.

The Real Time Information (RTI) operation of PAYE came into effect on 6 April 2013 and will apply to all employers, regardless of size, by 6 October. RTI withdraws the P38(S) form previously available to students, which enabled them to have their holiday wages paid without the income tax being deducted at source.

Many students work throughout the holidays to supplement their income, but the erratic nature of work that fits around study and exams means the tax system can struggle to keep up.

Often students can end up paying too much tax and have to claim a refund. Some students find they haven't paid enough tax and receive an unwelcome tax bill later on.

"It pays for students to make sure they know where they stand," said the LITRG, an initiative of the Chartered Institute of Taxation.

LITRG chairman, Anthony Thomas, said: "The P38(S) has been a casualty of introducing RTI and will affect some students, albeit in dwindling numbers over recent years as increasingly students have to work in term time as well to help finance their studies."

"We urge students to take an interest in their tax affairs at an early stage. They should check their PAYE coding notices and payslips to make sure as far as possible the right tax is being taken from them in-year and contact HMRC if they are unsure or think something is wrong."

"They should also gather together details of their income and tax paid in the last tax year which ended on 5 April 2013 and see if they might be due a repayment. Many will have earned less than their personal allowance of £8,105 for that year but still had tax deducted under PAYE."

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