Pay & Tax

Nearly all workers are entitled to minimum wages and for the most part students will fall under the category whereby they are entitled to national minimum wages. The current rates for 18 to 20 year olds are £4.98. For over 21s the rate is £6.02.

Being Paid

When you start work your employer should tell you:

  • the day or date when you’ll be paid – for example, each Friday, or the last working day of the month
  • how you will be paid, for example in cash, by cheque or directly to your bank

If you are an employee, you must be given a document which tells you how much you’ll be paid, and at what intervals, within two months of starting work. This is normally contained in your contract of employment.

Deductions from Pay

Your employer is not allowed to make a deduction from your pay or wages unless:

  • It is required or allowed by law, for example National Insurance, income tax or student loan repayments.
  • You agree in writing to a deduction
  • Your contract of employment says they can
  • It is a result of any statutory disciplinary proceedings
  • There is a statutory payment due to a public authority
  • You have not worked due to taking part in a strike or industrial action
  • It is to recover an earlier overpayment of wages or expenses
  • It is a result of a court order or Employment Tribunal decision

A deduction must not reduce your pay below the National Minimum Wage rate (except a limited amount for accommodation). This applies even if you have given your permission for it.

If you were overpaid in error, instead of making a deduction, your employer may try to recover the overpayment by making an application for a court order. For more information about how and when you might be able to prevent your employer from taking back an overpayment, you should speak to one of the following:

  • A solicitor.
  • An ACAS (Advisory, Conciliation and Arbitration Service) adviser.
  • A Citizens Advice Bureau adviser.

Students are entitled to national minimum wage, under all circumstances. You cannot opt out of minimum wage.

Current Rates:

  • 18-20 Year Olds: £4.98
  • Over 21s: £6.08

Tax

Although students don’t pay tax on grants or student loans, they are still liable for income tax and National Insurance in the same way as other workers.

Above your personal allowance, the amount you pay depends on the amount you earn. In 2009/2010:

  • Earnings below £7,475 are tax free
  • Earnings between £7,475 and £37,400 are liable for 20% tax.
  • Earnings over £37,401 are liable for 40% tax

Most employers deduct tax from your wages (called PAYE, or Pay As You Earn), and this is averaged out over the year. This means that although you may have a short term job, you pay tax on your income as though your job was year-round, and then you’re entitled to a refund at the end of the tax year.

If you only work during the holidays, and you expect to earn no more than the personal allowance for the tax year, just ask your employer for a Form P38(S) (PDF 94K). Fill this in and you won’t have any tax taken out of your wages.

National Insurance (NI) is a contribution to state benefits, and is payable on all income over £105 a week. Between £105 and £770 per week, you pay 11% of your income in NI contributions. Any earnings above £770 a week are charged at 1%.