Why might she have been paying tax when she does extra hours in her evening job? Can she claim a refund?

Transcription

1 Worked example common tax issues for students working multiple jobs During the tax year 2018/19 Alison comes to you with a question about her tax. It s coming up to the summer break and she has luckily found a job starting in July which will mean she can earn some extra money ( 250 a week) to fund her second year at university. Throughout her first year, she has been working evenings, earning about 125 a week. She s going to keep doing that job as well as the extra summer job. If there are more shifts available, she sometimes does extra hours and mentions that they sometimes take tax off her and her payslips show W1. She s not sure why she should have paid any tax and does not know what the W1 means. She s not sure how tax will work on her summer job. She has told the new employer she already has a job, but they have said that because she ll be earning more from them they will treat the job as if it is her first job of the tax year so they don t have to take 20% tax from her. Alison confirms she lives in Wales. Questions Why might she have been paying tax when she does extra hours in her evening job? Can she claim a refund? Is her new employer right to tell her to treat this job as her first job of the tax year? If not, what should she do instead? What is her National Insurance contributions situation likely to be on both jobs? Is there any additional advice you would give to Alison regarding her tax affairs?

2 Answer sections. Why might she have been paying tax when she does extra hours in her evening job? Can she claim a refund? - Alison earns 125 per week when doing her basic hours that is 6,500 per year so under the personal allowance threshold of 11,850, but she also sometimes works additional shifts. - The W1 week 1 tax code is an emergency tax code it means that only 1/12 th of Alison s tax allowance will be given to her each month so, if Alison earns above about 988 per month (or 227 a week), she will have tax deducted. Alison should call HMRC and ask them to change her tax code to a cumulative code as she will not be utilising her personal allowance each week; so any unused tax allowance could be carried forward to be used in later weeks. - It may be difficult for Alison to claim a refund during the tax year as her income from her job varies if she does additional shifts it depends on how much her earnings vary and when she started her job (to calculate the amount of unused personal allowance). - Alison may not be earning over 11,850 per tax year in both her jobs so she should review what she has earned at the end of the tax year and, if she has earned less than 11,850, she should write to HMRC and claim a tax refund.

3 Is her new employer right to tell her to treat this job as her first job of the tax year? If not, what should she do instead? - Alison s new employer should not treat her vacation job as her first job of the tax year if they do this, then it could be the case that Alison has a personal allowance of 11,850 allocated to both her jobs. This could result in no tax being deducted if it is due and Alison having a tax bill later on. - Alison s employer should ask her to complete new starter information that will show this is not her first job in the tax year. - If Alison is concerned that her employer has not used the details she has provided, Alison could contact HMRC to confirm her employment situation so that the correct tax code may be provided to her new employer or check the tax code on her Personal Tax Account. - Alison should also confirm with HMRC that they have her correct address so she receives any PAYE coding notices. - Although Alison is earning more per week with her new vacation job, over the tax year she will be earning more with her evening job: so it is advisable to keep her personal allowance against her evening job as this is the overall highest-earning employment.

4 What is her National Insurance contributions situation likely to be on both jobs? - National Insurance is calculated per pay period separately on Alison s jobs. - Alison s evening job earns 125 per week; this will mean that on a typical week Alison will not have to pay any National Insurance contributions, but she will receive credits for National Insurance contributions for weeks where she earns over 116 in the week. - If Alison works some additional shifts as part of her evening job, then she will have to start paying National Insurance for the weeks she earns more than Alison will be earning 250 per week with her vacation job she will be paying National Insurance of per week (( ) x 12%).

5 Is there any additional advice you would give to Alison regarding her tax affairs? - As Alison s employment situation is complex (a typical student example of more than one job earning irregular amounts), it is important that Alison revisits the situation at the end of the tax year to be confident that she has paid the correct amount of tax and, if she is due a refund, that she contacts HMRC promptly.