Worked example – common tax issues for students working multiple jobs
During the tax year 2016/17 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.
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?
Answer sections.
Why might she have been paying tax when she does extra hours in her evening job? Can she claim
a refund?
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Alison earns £125 per week when doing her basic hours – that is £6,500 per year so under
the personal allowance threshold of £11,000, but she also sometimes works additional
shifts.
The W1 – week 1 tax code is an emergency tax code – it means that only 1/12th of Alison’s
tax code will be given to her each month so, if Alison earns above about £917 per month (or
£211 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 £11,000 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 £11,000, she
should write to HMRC and claim a tax refund.
Back to questions
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?
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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 £11,000
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.
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.
Back to questions
What is her National Insurance contributions situation likely to be on both jobs?
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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 £112 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 £155.
Alison will be earning £250 per week with her vacation job – she will be paying National
Insurance of £11.40 per week ((£250-155) x 12%).
Back to questions
Is there any additional advice you would give to Alison regarding her tax affairs?
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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.
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