Enter Your E-mail

LITRG helps you to understand your taxes and check whether you might qualify for tax credits when you start work.

Introduction

Young people trying to enter the world of work continue to face a difficult labour market. Understanding your tax and tax credits situation can help to maximise your income and avoid possible traps.

What are you - employed or self-employed?

First of all, you need to understand the basis on which you are working and particularly if you are starting work for the first time, you need to be aware of possible pitfalls.

For instance, whether you are employed or self-employed is not a matter of ‘choice’; it depends on the circumstances. So be wary if:

• you are offered work and given a choice of being an employee or self-employed;
• someone you are going to work for tells you that you are self-employed.

LITRG’s 'employed or self employed?’ guide explains more.

Make sure you are paying the right tax

If you are an employee, you should always check your coding to confirm you are paying the right tax. If it is your first job, you will probably be asked to fill in a form P46; or if you have already had a part time job while you were studying, you should give your new employer your P45 from the old job.

Students who have worked only in the previous vacation this tax year (and not in term time) and who completed a P38(S) for that job, will not have received a P45. If you are in that position and are now taking on a new job, you will need to tick box B on the P46 and make sure the income you received under the P38(S) system is taken into account in the PAYE code for the new job. You will need to contact HMRC and tell them how much you earned under the P38(S) system so that they can adjust your code.

Becoming self-employed

If you set out in business working on a freelance/self-employed basis, you will need to notify HMRC, otherwise you could face a penalty.

Unemployed?

If you have worked since 6 April and paid tax on wages but are now unemployed, in some circumstances you can claim a tax refund.

Check if you are entitled to tax credits

A common misconception is that no workers under the age of 25 can claim tax credits, or that tax credits can only be claimed if you have children.

LITRG’s tax credits guidance can help, including factsheets explaining the basics:

• What are tax credits?
• Tax credits - myths
• Working tax credit
• Contacting HMRC about tax credits

Student loan repayments after leaving your course

Students leaving college or university this year who have taken out student loans might be thinking about having to pay them back. The good news is that you get a bit of breathing space, as repayments do not begin until the April following the end of your course, and only then if your earnings exceed the £15,000 a year threshold (increasing to £15,795 from 6 April 2012).

Useful links – LITRG website guidance

Checking your PAYE code
Understanding form P46
Students working in vacations only – form P38(S)
How to claim a refund of PAYE tax if you are unemployed
Student loan repayments